3906 / What are the separate account rules for purposes of the minimum distribution requirements?

If an employee’s benefit is divided into separate accounts under a defined contribution plan (or in the case of a defined benefit plan, into segregated shares) and the separate accounts have different beneficiaries, the accounts do not have to be aggregated for purposes of determining the required minimum distributions for years subsequent to the calendar year in which they were established (or date of death, if later).¹ Separate account treatment is permitted for the year following the year of death, provided the separate accounts are actually established by the end of the calendar year following death.

For purposes of Section 401(a)(9), separate accounts are portions of an employee’s benefit representing the separate interests of the employee’s beneficiaries under the plan as of the employee’s date of death for which separate accounting is maintained. The separate accounting must allocate all post-death investment gains and losses, contributions, and forfeitures for the period prior to the establishment of the separate accounts on a pro rata basis in a reasonable and consistent manner among the accounts.

Once separate accounts actually are established, the separate accounting can provide for separate investments in each account, with gains and losses attributable to such investments allocable only to that account. A separate accounting also must allocate any post-death distribution to the separate account of the beneficiary receiving it.²