Surviviving Spouse Beneficiary of IRA – elect to be treated as the deceased employee for purposes of the required minimum distribution – SECURE Act 2.0 Section 327
If a surviving spouse, who is the sole beneficiary of the IRA, elects to be treated as the deceased employee for purposes of the required minimum distribution, then does the beneficiary use Table III of Publication 590-B, rather than Table I? Does he or she “become the deceased owner’s age? Consider a a 40-year-old woman married to a 60-year-old man, each of whom has an IRA. If the man dies at age 60 and his widow is the sole beneficiary, then can she take non-substantially equal periodic payments, without the 10% penalty? If the woman dies at age 40 and her widower is the sole beneficiary, then can he wait 33 years until she would have turned 73 and he is 93 to start taking RMDs, and, if the answer is “Yes,” then can he wait 35 years until she would have turned 75 and he is 95 to start taking RMDs?
Does the “elect to be treated as the deceased employee for purposes of the required minimum distribution” method of taking RMDs for a spousal beneficiary apply to both Roth IRAs and traditional IRAs?
Do you have any citations?
Permalink Submitted by Eric H Silverman on Thu, 2024-06-06 20:19
I think that the answers to all of my questions are YES.
Permalink Submitted by Alan - IRA critic on Thu, 2024-06-06 23:22
Sec 327 was intended to place qualified plan spousal beneficiary options on par with IRA rules by allowing sole surviving spouses to elect to be treated as the owner of the plan (eg 401k) by making an irrevocable written election. Sec 327 is mandatory for deaths after 2023 but the IRS has not revised IRS Reg 1.408-8 for IRAs, which deal with IRA spousal beneficiary options.
For a spousal inherited IRA, the surviving spouse has always been allowed to elect to assume ownership and also to default to ownership by failing to complete a beneficiary RMD. So yes, the Uniform Table would apply for that spouse using spouse’s own age, not decedent’s age for years after the year of death.
If 60 year old spouse passes with 40 year old surviving spouse, the SS should not elect to assume ownership before 59.5 in order to avoid the 10% penalty, and she would not have to begin beneficiary RMDs until deceased spouse would have reached 75. She will be 55 at that time and will have to begin beneficiary RMDs at that time using Table I, but at 59.5 she can assume ownership and the beneficiary RMDs can cease until she reaches 75. This rule has not changed.
And if the 40 year old spouse passed first, her 60 year old SS could delay RMDs until she would have reached 75 if he wanted to and then could roll it over to his own IRA and use the Uniform Table. Due to a Secure 1.0 proposed Reg, he could not assume ownership because a new imposed deadline had passed, but he could still take a distribution from the inherited IRA in the year prior to the year beneficiary RMDs would start and roll it over to his own IRA and use the Uniform Table after that.
These rules apply to both TIRA and Roth IRA beneficiaries, but the Uniform Table will never apply to Roth IRAs as owners do not have RMDs.
Contrary to a Nov 2023 Slott Report article stated, I do not see where a spousal beneficiary who does not make the election cannot continue to delay beneficiary RMDs until the deceased spouse would have reached RMD age, but if under 59.5 could still take penalty free distributions.
There may be some unclarified questions the IRS will have to address, and soon.