Distribution requirements for plan benefit if participant dies before required beginning date

If a participant dies before the participant's required beginning date, the participant's plan benefit must be distributed under one of two methods. The first method - the life expectancy rule - is to use an applicable distribution period equal to the remaining life expectancy of the designated beneficiary, exactly as if the participant had died after the required beginning date. Under this method, the first distribution year is the year following the death of the employee and distributions would have to commence by December 31 of that year. This method is only available if in fact there is a designated beneficiary. The second method - the five-year rule - requires that the participant's entire interest be distributed by December 31 of the fifth calendar year after the year of the participant's death. Plans may specify which method is to apply or allow employees or their beneficiaries to select the method. The default method in the absence of a plan specification or participant selection is the life expectancy rule.

There is a special exception if a surviving spouse is the sole designated beneficiary. In that case, under the life expectancy method, distributions need not commence before December 31 of the calendar year in which the participant would have attained age 70½. Furthermore, if the surviving spouse dies before such benefits are required to begin, the minimum distribution rules are to be applied as if the surviving spouse were the participant. Thus, benefits could be distributed over the life of the surviving spouse's designated beneficiary.