403(b) and IRA Beneficiary Information for Spouses
The following information will help you understand some of the features and requirements of the retirement account you have inherited. As a beneficiary of this account, you have the option to keep the account with us, roll it over to your own 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. Please note that some rules differ between before-tax 403(b), Roth 403(b), Traditional IRA, or Roth IRA accounts for spousal beneficiaries. If you are a nonspousal beneficiary, please see the 403(b) and IRA Beneficiary Information for Nonspouses, Trusts, or Other Entities brochure.
There are four distinct options. The following questions and answers will help you understand each option.
Option 1: Rollover to your own account
Can I roll the account into my retirement account?
Yes, spousal beneficiaries may roll over all or part of the proceeds of a before-tax 403(b) or Traditional IRA account to a Traditional IRA, SEP IRA, 401(k), or governmental deferred compensation 457(b), 401(a), or 403(b) account (if plan allows). Roth 403(b) accounts can only roll over to another Roth 403(b), Roth 401(k), or Roth IRA. When a Roth 403(b) account is rolled over to a new Roth IRA, the five-year requirement to qualify for tax-free distribution starts at the time of the rollover. Roth 403(b) and Roth IRA accounts rolled into an existing Roth IRA account take on the holding period of the existing account.
If a spouse rolls the account into their own retirement plan, they must wait until they reach the qualified age (59½ in most cases) to take penalty-free distributions. As the owner, spousal beneficiaries may postpone distribution until they reach their required begin date. Since the life expectancy factor as the owner of an account may be higher, a rollover could maximize deferrals by not only delaying the distributions, but also by reducing the amount of distribution and related tax liability.
This may be a good option for you if you do not plan to take distributions until you reach your required begin date. It enables you to stretch out the tax-deferred (or tax-free) earnings.
Can I keep the account with you?
Yes, you may transfer/rollover your beneficiary account into your WEA TSA Trust 403(b) account, if the plan allows, or your WEA Member Benefits IRA account. If you do not have an account at the time of your spouse’s death, we can assist you with opening your account and transferring/rolling over your beneficiary account assets. 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.
When am I required to take Required Minimum Distributions (RMDs)?
By rolling the inherited assets into your own accounts, you follow the regular RMD rules for your account. These rules require RMDs begin once you reach age 72 and are based on your own age using the IRS Uniform Life Expectancy Table (exit to IRS). With this option, your RMD may be lower than if you transferred your assets to an Inherited IRA.
Option 2: Keep the beneficiary account or transfer/rollover the assets to an inherited IRA
Can I keep the beneficiary account with you or transfer the account to an Inherited IRA with you or a different custodian?
Spousal beneficiaries may choose to retain the beneficiary account or transfer/rollover the assets to an Inherited IRA. RMDs will be based on the spouse’s age and recalculated each year based on the factors in the IRS Single Life Table (exit to IRS). A benefit of this option is that distributions from an Inherited IRA, no matter what your age, are not subject to the 10% early withdrawal penalty.
You may choose to leave your beneficiary account with us or transfer/rollover the assets to an Inherited IRA account at a different custodian. 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.
When am I required to take a required minimum distribution (RMD)?
If your spouse was older than age 72 at the time of his/her death, you must begin taking RMDs by December 31 of the year following your spouse’s death. If your spouse was younger than age 72, you may be able to delay RMDs until your spouse would have turned 72.
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 your spouse 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 your spouse named you and a charity 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?
- No fees on transaction distributions. WEA Member Benefits doesn’t charge transaction fees, regardless of account type.
- Successor beneficiaries. You may designate your own beneficiaries.
- Flexible distribution options. Monthly, quarterly, semiannually, annually, or 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?
If you transferred/rolled over your beneficiary account into your own 403(b) or IRA account, you must follow the account distribution rules. Please see the 403(b) Withdrawal Options and/or IRA Withdrawal Options brochure(s) for additional information. If your account is a beneficiary account, you may begin making penalty-free withdrawals at any time.
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 RMDs?
The RMD rules work to liquidate your account—regardless if it is your own account or a beneficiary account—through distributions. While RMD requirements dictate the minimum amount that must be distributed, you are free to withdraw more than required under the RMD rules. If you are a spouse and you choose to roll over the inherited account to your own account, you may be able to stretch the payments over a longer period of time.
How will I know the amount of my RMD?
You will receive a notice each year advising you that you are required to take an RMD. The notice will provide you with resources on how to calculate the minimum amount that must be distributed. You can also call a member service representative to assist you with calculating your required minimum amount.
How is an RMD determined?
The RMD is based on life expectancy. The RMD is calculated by dividing your previous year-end account balance by the applicable life expectancy factor, which can be obtained from either the Uniform Life Expectancy or Single Life Expectancy table. If you would like more information on this topic, you can call us or you can request Publication 571 Tax-Sheltered Annuity Plans (403(b) Plans), from the IRS Web site at irs.gov.
Are distributions from my own account or 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 3439-280-0820 (W)