4084 / How are the minimum distribution requirements met after the death of a tax sheltered annuity participant?

Editor’s Note: Post-SECURE Act, it was widely expected that the minimum distribution rules would no longer vary based upon whether the participant dies before or after his or her required beginning date. However, under regulations proposed in 2022, a beneficiary will be required to take annual RMDs during the new ten-year distribution period if the original account owner died on or after his or her required beginning date. See Q 3902 for details.

A tax sheltered annuity must satisfy the minimum distribution requirements set forth in IRC Section 401(a)(9) for qualified plans.¹ Most of the requirements were explained in regulations published in 2002.² Regulations governing annuity payouts from defined benefit plans were finalized in 2004 ( Q 4078, Q 3754), and regulations addressing additional matters were finalized under IRC Section 403(b) in 2007.³

The 2002 regulations simplified the calculation process and included longer life expectancy tables. The final regulations took effect for required minimum distributions in 2003 and later years ( Q 3896, Q 4078).

Pre-SECURE Act, after the death of a tax sheltered annuity participant, the application of the minimum distribution requirements depended on whether he or she died before or after his or her required beginning date. For this purpose, distributions generally were treated as having begun in accordance with the minimum distribution requirements under IRC Section 401(a)(9)(A)(ii), without regard to whether payments had been made before that date.⁴ If distributions irrevocably, except for acceleration, began prior to the required beginning date in the form of an annuity that meets the minimum distribution rules, the annuity starting date was treated as the required beginning date for purposes of calculating lifetime and after death minimum distribution requirements.⁵