SECURE Act Distribution Options for Inherited IRA vs Inherited Qualified Plan
Hello,
With respect to the SECURE Act of 2019 and the rule changes that occurred for non-spouse beneficiaries and the new rules for eligible designated beneficiaries (EDBs):
1. Do these rules apply the same to beneficiaries who inherit an IRA from a decedent vs. ones that inherited a 401k from a decedent?
2. Can an inherited qualified plan (401k) restrict beneficiary distribution options to require a more rapid distribution period than the SECURE Act would offer with an inherited traditional IRA?
Permalink Submitted by Alan - IRA critic on Mon, 2022-08-01 22:22
The Secure Act rules and pending proposed Regs treat 401k and IRAs beneficiaries basically the same. However, an employer plan is more likely to contain specific plan restrictions. For example, the proposed Regs allow a 401k plan EDB beneficiary to elect out of life expectancy RMDs and into the 10 year rule when the participant passed prior to RBD, but some plans may not allow this election. It is very unlikely that an IRA agreement would not allow this election.
Permalink Submitted by David Mertz on Mon, 2022-08-01 23:27
Additionally, for governmental plans the changes apply for decedents dying after 2021 while for all other plans and IRAs the changes apply for decedents dying after 2019. (If an inherited plan is rolled over to an inherited IRA, the RMD requirement of the plan carries over to the IRA.)