Distribution Options for Beneficiaries

If you, as the JRB plan participant, should pass away, what happens to the assets in your JRB retirement account? This article provides an overview of the options available to your beneficiaries.

The inheritance of your JRB retirement account is determined by the primary and/or contingent beneficiaries on file with the JRB. Your written Will does not override the selection made on your beneficiary form. Contact the JRB to see if your beneficiary designation is up-to-date.

Before and After 2020

The SECURE Act, signed into law in December 2019, changed the rules for distributing assets from an inherited 403(b) plan such as the one offered by the JRB. Beneficiaries of those who died before January 1, 2020 can generally “stretch" distributions from the account for the rest of their lives. The regulations governing distributions from accounts of those who died on or after January 1, 2020, as described below, reduce the ability of beneficiaries to “stretch” benefits beyond 10 years after the death of the account owner.

Three Types of Beneficiaries

Tax law distinguishes between three types of beneficiaries.

  • An eligible designated beneficiary includes a surviving spouse, a disabled individual, a chronically ill individual, a minor child or an individual who is not more than 10 years younger than the account owner. Most eligible designated beneficiaries may take their distributions over the remainder of the beneficiary's life. Minor children are the one exception; they must take remaining distributions within 10 years after reaching the age of majority (which differs by state). A surviving spouse beneficiary may delay commencement of distributions from the account until the later of the end of the year that the participant would have attained age 72 or when the surviving spouse turns 72. Age 72 is when the Required Minimum Distribution goes into effect.
  • Designated beneficiaries include all other individuals such as adult children, siblings, friends, etc. Designated beneficiaries must withdraw the entire inherited amount by December 31st of the year containing the 10th anniversary of the participant’s death.
  • Non-designated beneficiaries are those which do not have a life expectancy. This includes estates, some trusts and charitable organizations. Non-designated beneficiaries must withdraw all assets in the account within 5 years of the participant’s death.

The rules governing the inheritance of retirement account assets can be complex. Please contact the JRB or call us at 888-JRB-FREE (572-3733) to make sure your beneficiary designations are up-to-date.