Consequences of Nonspouse Roth IRA Beneficiary's Failure to Begin Taking RMDs

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Consequences of Nonspouse Roth IRA Beneficiary’s Failure to Begin Taking RMDs

Posted by Kim Chen on November 28th, 2016

Although the Required Minimum Distribution (RMD) rules of IRC Sec. 401(a)(9)(A) don’t apply to Roth IRAs during the owner’s life, post-death distributions must be made according to the RMD rules as if the Roth IRA owner died before the required beginning date. The IRS recently addressed whether a nonspouse beneficiary’s failure to begin RMDs within one year of the Roth IRA owner’s death made the life expectancy rule inapplicable and required that distributions be made under Section 401(a)(9) ‘s “five-year rule.” The IRS explained that RMDs must be made according to the life expectancy rule unless the plan (1) requires distributions to be made under the five-year rule or (2) allows the beneficiary to elect the five-year rule, and the beneficiary timely makes the election. The applicable distribution period is based on these rules—not on whether distributions were timely received. Information Letter 2016-0071.