... Effect of death.

• Author: Slattery, Kelly A.
• Position: Lump sum distributions - Brief Article

What would happen if all of the lump-sum distribution criteria were met except that the employee received partial distributions from the account during the year but died before the total balance was distributed?

Unfortunately, the predeath distributions would not be eligible for lump-sum treatment since the employee's tax year would have ended on the date of death (under Regs. Sec. 1.443-1(a)(2)) when the employee's account still had a balance. Even if the beneficiary receives the account balance before his tax year ends (usually the calendar year), the predeath distributions would not qualify. This unfavorable treatment also could...