Distribution rules are generally the same for 401(k) and governmental 457(b) plans in regards to RMDs at age 70 1/2 or for an inherited plan. Effective as of 2007, a non-spouse beneficiary (like a child or grandchild) who is named on the beneficiary form and inherits a 401(k) or governmental 457(b) plan balance can transfer that plan balance directly to a properly set up inherited IRA that can be stretched over their lifetime. Beginning in 2010, company plans must allow this post death transfer.
The transfer must be done as a direct rollover (trustee-to-trustee transfer) from the plan to an inherited IRA. Both the transfer and the first RMD must be done by December 31st of the year after the plan participant’s death. If those deadlines are not met, the distributions must be made in accordance with the options available in the plan, not those available in the inherited IRA.
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