Secure Act

Submitted by Robert Ervolina on Wed, 2020-02-12 20:33

It is my understanding that employers are not required to offer plan beneficiaries the “stretch” option. I realize employers must allow a transfer out to a properly titled inherited IRA (Assuming the beneficiary qualifies as an eligible designated beneficiary or i would now also assume a designated beneficiary subject to the 10 year rule).

Under the Secure Act, are employers required to allow the plan beneficiary to leave the assets in the plan under the 10 year rule if the beneficiary chooses to do so or is it up to the employer to allow it pursuant to the plan? Or is it just like it was… Move it by end of year following year of death or the beneficiary gets stuck with plan’s options?

One last question. Probably a dumb one, but here it goes. Within the definition of EDB, a beneficiary who is not more than 10 years younger than the deceased qualifies for life expectancy stretch….what about if the beneficiary is not more than 10 years older? Would this person qualify for stretch or be limited to 10 year rule. Thx.



Submitted by Alan - IRA critic on Wed, 2020-02-12 21:44

  • The Secure Act does not affect qualified plan options that are more restrictive than those in Sec 401(a)(9). Therefore, a plan can apply a mandatory 5 year rule, require the beneficiary to make an election of LE by the end of the second year, or directly roll the balance out of the inherited plan by the end of the second year to avoid mandatory 5 year rule. These provisions are addressed in IRS Reg 1.401(a)(9)-3, QA 4. Secure does not limit these more restrictive plan provisions or require the plan to retain assets for any length of time.
  • With respect to beneficiary age relative to the decedent, if more than 10 years younger beneficiary will be an EDB, and all other designated beneficiaries who do not otherwise qualify as EDBs will be non EDBs regardless of age. However, it is not clear whether a beneficiary older than the decedent will still have the option to use the decedent’s life expectancy or not, as non DBs do. Without this option, a non DB is better off than a non EDB if the participant passes at age 73-80. The IRS will have to clarify whether this option still exists. 

Submitted by David Mertz on Wed, 2020-02-12 21:56

Alan, shouldn’t that be *not*more than 10 years younger?

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