Spouse Beneficiary Rules 2003
Rev. 08/28/03, E-mail Alert 2003-16 Rev. 11/11/08

Updated Spouse Beneficiary Rules for 2008

If the participant dies after the year in which age 70 ½ is attained, the spouse beneficiary options are different from other beneficiaries. The spouse must start distributions by December 31st of the year after the participant dies. However, the spouse is able to use the single life table to determine the life expectancy used to calculate distributions using his or her own attained age each year. Of course, the spouse could always accelerate the payments unless the plan or beneficiary form prevent.

If the participant dies before the December 31st of the year in which age70½ would be attained, there are special rules that apply only to a spouse beneficiary.

If the spouse is the sole designated, the surviving spouse must begin distributions by the later of:

1. December 31st of the year after the participant died, or
   
2. December 31st of the year in which the participant would have attained age 70½.
   

The spouse may establish a life expectancy payout based the greater of the remaining single life expectancy of the participant or on his or her own single life expectancy.

A spouse may name a beneficiary(s) even if the payouts are being made from the participant’s plan. If the spouse of the deceased participant dies before the plan’s benefits are fully distributed, the spouse’s beneficiaries’ options are based on whether the spouse died before benefits commenced.

The definition of when “benefits commence” to a surviving spouse in the final regulations is as of December 31 of the calendar year in which the deceased participant attained or would have attained age 70½. So if a participant died at age 57 and the spouse started to receive distributions by December 31 of the year after the participant died, and then the surviving spouse died at age 67, the surviving spouse, according to the regulations, did not actually have “benefits commence.” The significance of this is that there are different options for the then surviving beneficiaries based on whether the participant’s surviving spouse had actually “commenced benefits” or not.

If the spouse dies before benefits commence, then the beneficiary rules apply as if the spouse were the participant. The spouse’s beneficiary(ies) would use the normal non-spouse beneficiary options but they would use the spouse’s date of birth instead of the participant’s. If no designated beneficiary, the five–year rule would apply.

Special “benefits commence” rule does not apply in the following cases:

• If the participant dies after the year in which the participant attains age 70 ½ .
  
• If the spouse is not the sole primary beneficiary, then the benefit commencement rules above do not apply. In such a case, the spouse would have to commence benefits by the December 31st after the year of the participant’s death.
  
• If the surviving spouse remarries and names the new spouse as beneficiary.
  

Bill Grossman, QPA