Missed 403b RMD for non-spouse
Plan participant died in 2018 over the age of 70.5. She took the RMD for 2018. The account was split between the two children in the appropriate time. The daughter did not take her RMD in 2019 and just now realized she was supposed to. Obviously there was no RMD for 2020.
My question is about whether she can still stretch the RMD’s over life or she now stuck with the 5 year rule? I understand that she still needs to take the 2019 if stretch is allowed and will either be penalized or needs to ask for forgiveness.
Thanks in advance
-Nick
Permalink Submitted by Alan - IRA critic on Thu, 2021-01-14 15:08
The 5 year rule never applies when the participant passes after the RBD, which is 4/1 of the year following the year of reaching 70.5 (Pre Secure Act). In this situation life expectancy RMDs apply and the late RMD must be made up and a 5329 filed for 2019 requesting waiver of the penalty. Missed RMD should be distributed first.
Sometimes children will inherit more than one 403b from the same parent. In such a case, the RMDs can be aggregated between the two accounts in any portion. This aggregation rule (same as for IRAs) may discourage 403b administrators from forcing out RMDs like they should. Others may assume they are the only 403b plan, but apparently this plan did nothing and could be subject to sanctions. Of course, daughter could have and could still do a direct rollover to an inherited IRA. She would have to make up the missed 2019 RMD and also take her 2021 RMD before the rest was rolled over.
Her RMD divisor for 2021 is 2.0 less than what her correct divisor would have been for 2019 based on her attained age in 2019.