Qualified annuity: beneficiary of surviving spouse

[appelman]

The owner of a qualified 403(b) retirement annuity dies, and the spouse is
taking RMD in regular payments. The spouse subsequently dies. Do the
spouse's beneficiaries have the same distribution options that they
would have had if they had been non-spousal beneficiaries of the
original annuity owner?

[AZUKHiker]

Same As IRA Rules

As the distribution rules for a 403(b) annuity are the same as an IRA (apart from the surviving spouse own account option) I would say yes. So follow the same rules as would apply to the beneficiary of a surviving spouse IRA. 1.408-2(7).

[Roland Slugg]

It depends. A 403(b) is an "employer plan," not an IRA, and different distribution rules apply to each. However, a 403(b) may be a "deemed IRA," so you will need to find out if it is.

If the account is not a "deemed IRA," I believe the RMD payouts may continue to be based on the owner's (i.e. the original decedent's) life expectancy table. However, if the 403(b) was transferred to the surviving spouse, if that is even possible for 403(b) plans, then the RMD payouts would be based on that person's payout table.

If the account is a "deemed IRA," then the IRA distribution rules apply. These can be found in IRS Pub 590B, and at the top of page 9 of that Pub it says,

Death of a beneficiary. In general, the beneficiaries of a deceased beneficiary must continue to take the required minimum distributions after the deceased beneficiary’s death, based on the distribution schedule established by that beneficiary.

I would urge you, however, to read more than just the single sentence quoted above.

Finally, if the account is not a "deemed IRA" (and it probably isn't) your best source for distribution options may be the school's HR department or its internal or external retirement specialists.

[TAXNJ]

Prior post

See Prior post -- Default Beneficiary IRA and Non Deductible IRA 5-10-15 POST

If deemed an IRA, see if this may or not apply.