Successor Beneficiary of 403B Not Allowed Inherited IRA Rollover

Submitted by Karen Elise Kilbride on Fri, 2023-05-26 16:58

Son is designated beneficiary of his father’s 403(b).   His father inherited the 403B from his spouse when she died in 2014 at the age of 70 1/2.  Father dies in 2023.

 The custodian is maintaining that son who is successor beneficiary of 403B can not roll his beneficiary proceeds out to an ‘Inherited IRA / Beneficiary Distribution Account’ because of this being ‘twice-inherited’.   He has to maintain the existing plan and choose among the plan assets.

I thought this was addressed by Code Sec. 402(c)(11), to allow rollover distributions to an inherited IRA of a nonspouse beneficiary after 2006, making rollovers to inherited IRA’s a mandatory rule for qualified retirement plans.

Can you help?



Submitted by Alan - IRA critic on Fri, 2023-05-26 17:29

  • The plan administrator is correct. See 402(c)(11)(A), which states that a direct rollover to an inherited IRA is allowed for designated beneficiaries. A successor beneficiary is not “designated” by the owner and therefore is not eligible for a direct rollover. Some plans will require a lump sum taxable distribution to successor beneficiaries, but the IRS Secure Act rule allows the successor beneficiary to use the 10 year rule.
  • Where Secure 1.0 gets complicated is that father’s wife appears to have passed prior to RBD because her RBD was 4/1 of the year following the year she reached 70.5. Therefore, son would not have to continue father’s RMD schedule in years 1-9 and would only have to drain the 403b by the end of 2033. Note that son is also responsible for completing father’s 2023 year of death RMD if that was not completed by father.

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