CRPC Required Minimum Distributions and Beneficiary Planning 4

Question 1

A participant in a 403(b) plan has pre-1987 account balances. How are those balances treated for RMD purposes?

Accepted Answer

They are entirely exempt from RMD rules during the participant's lifetime

Answer

Pre-1987 403(b) account balances are grandfathered and exempt from lifetime RMD requirements under a special rule.

Question 2

Under the 10-year rule for non-eligible designated beneficiaries, when must the entire inherited IRA be fully distributed?

Accepted Answer

By December 31 of the 10th year following the owner's death

Answer

The 10-year rule requires full distribution of inherited IRA assets by December 31 of the 10th year following the IRA owner's death.

Question 3

Which of the following individuals qualifies as an 'eligible designated beneficiary' entitled to stretch distributions over their own life expectancy?

Accepted Answer

A chronically ill individual as defined under IRC Section 7702B

Answer

Chronically ill individuals are one of five categories of eligible designated beneficiaries who may use the life expectancy stretch method under SECURE Act rules.

Question 4

A Roth IRA owner dies in 2024 leaving the account to an adult child. What RMD obligation, if any, applies to the child?

Accepted Answer

No RMDs are required; the child must only empty the account by December 31 of the 10th year

Answer

Inherited Roth IRAs are subject to the 10-year rule for non-eligible designated beneficiaries but no annual RMDs are required within those 10 years.

Question 5

What is the penalty for failing to take a required minimum distribution, and what discretionary relief did SECURE 2.0 provide?

Accepted Answer

25% excise tax reduced to 10% if corrected in a timely manner

Answer

SECURE 2.0 reduced the RMD failure penalty from 50% to 25%, further reducible to 10% if the shortfall is corrected within the correction window.

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC - Chartered Retirement Planning Counselor Practice Test

CRPC Required Minimum Distributions and Beneficiary Planning 4