RMDs and death on or after RBD Non-spouse beneficiary

Submitted by Thomas Granger on Tue, 2015-02-10 17:57

403(b)account owner died in 2010, post RBD, not still working, last worked 2005.

Sole beneficiary is non-spouse.

Fast forward to today and no RMDs have been taken for 2010, 2011, 2012, 2013 and 2014.

Current financial institution is telling the beneficiary that they will transfer the account, minus the 2010 rmd, to an inherited IRA and the beneficiary can then stretch the distributions over their life expectancy.

Don’t think the above is accurate, but, if all the RMDs were caught up, then the inherited IRA established, could the beneficiary still stretch the distributions over their life expectancy?



Submitted by Alan - IRA critic on Tue, 2015-02-10 18:43

 The owner’s 2010 RMD should be distributed if that RMD was not completed. along with the 2011-2015 RMDs using the beneficiary’s life expectancy and the remainder directly rolled over to an inherited TIRA or inherited Roth IRA. Of course, if beneficiary is older than the decedent. the decedent’s remaining life expectancy could be used as that would reduce the beneficiary RMDs. The plan should not do a direct rollover without making up all the missing RMDs. Not sure why the plan was not monitoring the RMDs for the beneficiary, but the beneficiary now needs to file a 5329 with a 1040X for 2010-2013 (or 14) to request a penalty waiver for reasonable cause.



Submitted by Ben Meyer on Wed, 2015-02-11 20:20

Does the Custodian or financial institution have any liability for the penalties?



Submitted by Alan - IRA critic on Wed, 2015-02-11 21:17

The excise tax falls on the participants, so the beneficiary should still file the 5329. However, the plan administrator has responsibilities under EPCRS, detailed here:http://www.mhco.com/BreakingNews/ARMD1_112114.html

  • The plan must calculate earnings on the missed RMDs and distribute them with the earnings. However, as the link indicates, the participant will not know which method the plan is using or number of RMD failures there were. Beneficiary could ask plan to provide further advice  on what to include with the 5329 waiver request, since the plan can also request the waiver on behalf of the beneficiary. Not sure if all situations require them to do so. Being that this is a qualified plan, the IRS will likely approve participant’s waiver request since the primary responsibility for RMDs falls on the plan with secondary responsibility on the beneficiary (Participant).


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