Resulting from the passage of the SECURE Act, which became effective on January 1, 20220, inherited solo 401k funds must be distributed over a 10-year period.
The 10-year rule is applied in the following fashion depending if the solo 401k participant died before or after his or her required minimum distribution beginning date which is age 73.
If the Solo 401k Participant Died BEFORE Age 73
Under this rule, if the solo 401k participant died before his or her required beginning date (RBD), then the non-spouse beneficiary of the solo 401k can transfer the solo 401k to his or her own beneficiary IRA and take distributions at anytime and in any amount as long as the beneficiary IRA is fully distributed by December 31 of the year containing the 10th anniversary of the solo 401k participant’s death.
The solo 401k participant died AFTER Age 73
If he solo 401k participant died after his or her required minimum distribution beginning date,which is age 73, and the solo 401k name beneficiary is a non-spouse, the solo 401k is transferred to a beneficiary IRA and the beneficiary is required to start taking distributions immediately following the year of the solo 401k participant’s death from the beneficiary IRA based on his or her life expectancy. In sum, annual distributions are required for the first 9 years and the beneficiary IRA must be fully depleted by the end of the 10th year.
