Whose age to use for RMD?

Submitted by Joseph Curtis on Fri, 2023-09-22 23:33

An 81 year old 403(b) account holder died late in 2021. Her spouse, then aged 77, is the beneficiary. NO action was taken on this account during 2022. For various reasons (some very good) the account documents stayed in a drawer until September 2023. The deceased’s name (not the spouse’s) is still on the account and no RMD was taken during 2022.

How should the overdue RMD be calculated for 2022? Since the account is still in the decedent’s name, should the RMD be calculated for the decedent at age 82, or should the beneficiary spouse’s age be used, although the account is not yet in his name. Or, more obscure, is this some type of an inherited IRA until it is officially in the name of the spouse? One consideration is that the investment company probably reported the RMD for the decedent’s age to the IRS, because they were unaware of the death, so that may be what the IRS is expecting to see.



Submitted by Alan - IRA critic on Sat, 2023-09-23 00:35

  • The beneficiary inherited the account upon spouse’s death and the beneficiary RMD is not affected by delays in reporting the death to the plan. The beneficiary’s age in 2022 is used to determine the 2022 beneficiary divisor from the single life table and that 2022 RMD should be distributed ASAP and a 5329 filed to request that the penalty be waived for reasonable cause. Further, the beneficiary was responsible for completing spouse’s 2021 RMD if spouse did not complete it and a 5329 filed for 2021 if that RMD was never completed. If there was more than one 403b account, RMDs can be aggregated in the same manner as IRA RMDs. 
  • If surviving spouse chooses to roll over the inherited 403b to his own IRA, the 2023 403b beneficiary RMD must be completed first. The beneficiary can enter the single life table each year if they are the sole beneficiary instead of reducing the first divisor by 1.0 each year. Starting next year if the plan is rolled over to an IRA, the RMD will decrease because the Uniform Table will then apply for 2024 and beyond. 
  • Sec 327 of Secure 2.0 will allow the surviving spouse to elect to be treated as the owner of the 403b effective in 2024. Prior to 2024 this was only allowed for IRA beneficiaries. Therefore, if the surviving spouse prefers the 403b for some reason he could wait until January to notify the plan that is has elected to be treated as the owner. 
  • The IRS has probably not compared the final 2021 1040 showing the death of spouse for RMD compliance and the IRS depends on qualified plans to enforce RMD rules, but if the death was not timely reported to the plan the plan will not act until they are so notified.  All delinquent RMDs are taxable to the surviving spouse in the year received.

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