403(b) and IRA Beneficiary Information for Nonspouses, Trusts, or Other Entities
The following information will help you understand some of the features and requirements of the retirement account that you have inherited. You have the option to keep the account with us as a beneficiary IRA or 403(b) account, roll it into an Inherited IRA account, liquidate it, or disclaim the account. Please read this brochure to find out what each of these options means for you. If you have additional questions, call us at 1-800-279-4030, Extension 8568. Please note that some rules differ between before-tax 403(b), Roth 403(b), Traditional IRA, and Roth IRA accounts for nonspousal beneficiaries. If you are a spousal beneficiary, please see the 403(b) and IRA Beneficiary Information for Spouses brochure.
There are four distinct options. The following questions and answers will help you understand each option.
Option 1: Keep the beneficiary account with WEA Member Benefits
Can I keep the account with you?
Yes. You can read about the benefits of keeping your account with WEA Member Benefits in the Keeping Your Account with WEA Member Benefits section of this brochure.
Am I an eligible designated beneficiary?
Eligible designated beneficiaries include a surviving spouse, a minor child of the deceased owner, disabled or chronically ill individual or any other person who is not more than 10 years younger than the deceased account holder. Please note, a minor child of the deceased owner can use the life expectancy calculation until the child reaches the age of majority (as defined by their state of residence), at which point, assets in the beneficiary account must be fully withdrawn within 10 years of the minor child reaching the age of majority.
What are my required distributions?
For those where the original account owner died January 1, 2020 or after, and you are not an eligible designated beneficiary, you must follow the 10-year rule. Under the 10-year rule, you must withdraw all assets from the beneficiary account by December 31 of the 10th anniversary year of the original account owner’s death. You can withdraw from your beneficiary account assets at any time, in any amount within the 10-year timeframe.
For beneficiary account owners whom the original account owner died prior to January 1, 2020, you can choose to liquidate the account within 5 years or take the RMD over your lifetime.
If the beneficiary is an entity, charity, or non-qualifying trust, and the owner was still living by April 1 of the year in which the account holder reached age 72, the distribution would be based on the remaining Single Life Expectancy of the original account holder. If the owner was younger than 72, the assets must be completely distributed by December 31 or the 5th year containing the anniversary of the account owner’s death.
Option 2: Transfer/rollover 403(b) assets to an inherited IRA
Can I transfer or rollover the beneficiary account to a different custodian?
Yes. You may choose to transfer or rollover your beneficiary account to a different custodian. Keep in mind, nonspouse beneficiaries are not able to transfer or rollover inherited 403(b) or IRA accounts into their own IRA or workplace retirement account.
You may choose to leave your beneficiary account with us. You can read about the benefits of keeping your account with WEA Member Benefits in the Keeping Your Account With WEA Member Benefits section of this brochure.
Can I roll the account into my retirement account?
No, nonspousal beneficiaries are not allowed to roll an inherited account into their own account.
Option 3: Liquidate the account
Can I liquidate the account?
Yes; however, you will be required to pay ordinary income taxes on the taxable portion of your distribution for the year in which you withdraw it. Withdrawals may be subject to 20% federal income tax withholding.
Option 4: Disclaim the account
Can I disclaim my interest in this account?
Yes. You may choose to disclaim all or a portion of your inherited account to other beneficiaries named by the original owner. For example, if you are the only primary beneficiary and the original account holder named your children as contingent beneficiaries, you have the right to disclaim all or a portion of your interest in the account, and it would pass to your children. The children would be required to liquidate the account within 10 years of the original account owner’s date of death. Likewise, if you and a charity were named as beneficiaries and you chose to disclaim, the charity would receive your portion of the account.
Disclaiming is not for everyone, but it could be a valuable estate planning tool. You may want to consult your tax advisor or attorney.
When must I notify you of my intention to disclaim?
You must notify us in writing within nine months of the account owner’s death. You may disclaim if you have not made any account changes, such as beneficiary or investment changes.
Keeping your account with WEA Member Benefits
What are the advantages to retaining the account with WEA Member Benefits?
- Transaction-free distribution. WEA Member Benefits does not charge transaction fees, regardless of account type.
- Successor beneficiaries. You may designate your own beneficiaries.
- Flexible distribution options. Monthly, quarterly, semiannually, annually, and lump-sum withdrawals.
- Online account access. Create your account at yourMONEY to view account activity and monitor your performance.
- Control the investments. We offer no-load mutual funds, lifecycle funds, and other fixed investments to help you build a suitable, diversified portfolio. You may move money between investments as long as it complies with the mutual fund’s excessive trading policy. Please read the appropriate prospectus.
- Low-cost. We are a low-cost alternative to products offered by the rest of the financial industry. View our 403(b) and IRA fee structures. Understand the roles fees play in your retirement portfolio by visiting weabenefits.com/fees.
- Personal assistance. You have access to personal service from a licensed, non-commissioned representative when you need it.
When can I withdraw money from the beneficiary account?
You may begin making penalty-free withdrawals from your beneficiary account at any time. Partial lump-sum distributions must be a minimum of $500.
Are periodic distributions available?
Yes. You can choose from any of the following automatic distribution options. Remember, yearly distributions must meet or exceed required minimum distributions, if applicable. We withhold 20% for federal taxes for the 403(b). Distribution are processed on the 10th of each month or the next business day.
- Scheduled payments—Choose a fixed dollar amount to receive monthly, quarterly, semiannually, or annually. Distributions must be a minimum of $100.
- Declining balance payments—You can choose to have your account balance paid to you over a specific period of time.
Why do I have to take required distributions?
The rules work to liquidate your beneficiary account through distributions. If you are not an eligible designated beneficiary, you are free to withdraw any amount as long as the account is depleted within 10 years. If you are an eligible designated beneficiary, you are free to withdraw any amount at any time, but you are required to withdraw a minimum amount based on the single life expectancy table over a longer period of time.
How will I know the amount of my RMD?
If you would like more information on this topic, call us or request Publication 571 Tax-Sheltered Annuity Plans (403(b) Plans) from the IRS Web site at irs.gov.
Are distributions from my inherited account taxable?
Distributions from your before-tax 403(b) are considered ordinary income and are subject to federal and state income tax. Qualified Roth (after-tax) 403(b) or Roth IRA distributions are tax-free. A Roth account must have been held for five years before distributions are qualified for tax-free treatment. Earnings on non-qualified Roth distributions are taxed.
Are income taxes withheld from my taxable distribution?
The IRS rules require withholding federal income tax at the rate of 10% on any taxable distribution that includes an RMD unless you instruct us otherwise. All other 403(b) distributions require withholding of 20% of the taxable amount.
May I have my distributions sent directly to my financial institution?
Yes. You may arrange to have the money deposited directly into an account in your name at your financial institution.
If you would like to discuss any questions you have about this account, please call us at 1‑800‑279‑4030.
TSA 4437-280-1021 (W)