4081 / How is the designated beneficiary under a tax sheltered annuity determined?
Editor’s Note: The SECURE Act significantly changed the rules applicable to designated beneficiaries and eligible designated beneficiaries for tax years beginning in 2020 and thereafter. The SECURE Act generally did not change the rules applicable to surviving spouses. See Q 3902 and Q for details.
A designated beneficiary means any individual designated as a beneficiary by a participant.1 Under the 2002 regulations, a participant’s designated beneficiary is determined based on the beneficiaries designated as of September 30 of the calendar year following the year of the participant’s death.2
Thus, for example, a beneficiary who disclaims his or her interest after the death of the participant but before the September 30 deadline would not be a considered a beneficiary for this purpose. Under the SECURE Act rules, beneficiary status is determined as of the date of the account owner’s death. Exceptions apply if the account is payable as an annuity or if a surviving spouse beneficiary dies after the participant but before distributions have begun ( Q 3904).