Non-spouse bene RMD from 457(b)
Municipal employee died this year at 72 while still employed. Never took an RMD from the deferred comp plan since he was working. Brother is beneficiary and he wants to roll over to a beneficiary IRA. Does he need to take the 2008 RMD based on the deceased’s life expectancy before the IRA rollover? Whose life expecetancy will be used to receive RMDs from the IRA, the deceased’s or the beneficiary’s?
Permalink Submitted by Alan Spross on Fri, 2008-05-16 23:29
First, it is important to note that at this time, the ability to do a direct transfer of an inherited IRA remains optional for the 457b plan. If this plan does not allow the transfer at this time, it may be worth it to delay somewhat longer to see if the IRS changes the recent ruling or the plan decides to offer the transfer. The plan death benefit cannot be rolled over by a non spouse, therefore the brother should move the assets to an inherited IRA only by direct transfer, if available.
Since the employee passed prior to the required beginning date, there is no RMD required for 2008, and the first RMD would be due prior to 12/31/09 from either an inherited IRA or directly from the plan IF the plan allows life expectancy distributions for deaths prior to the required beginning date. If the plan allows neither, his brother could be stuck with the 5 year rule under which the entire balance had to be distributed no later than 12/31/2013. The plan may also provide election options to the beneficiary and he needs to find out what they are so that any time limit for election can be made.