You must designate beneficiaries for your retirement account and life insurance benefit when enrolling in RPB. But as we move through life, our circumstances changes, and so it is of utmost importance to keep your beneficiary designations up-to-date. This is especially important if you have a change in marital status through marriage, divorce, death of a spouse, or any other situation that results in a need to change your beneficiaries. Having out-of-date beneficiaries could result in a delay in paying benefits, or could result in paying benefits to someone whom you no longer want to receive your retirement account balance.
Beneficiary Designation Forms
You can designate any person, estate, trust, organization or charity as your beneficiary. If you are married, your spouse is automatically your sole primary beneficiary unless the spouse signs off to acknowledge the beneficiary designation. If you fail to designate a beneficiary for your RPB account and for your life insurance benefit, your spouse will be the beneficiary; if you are not married and you fail to designate a beneficiary, your estate will be the beneficiary.
You can allocate portions of your RPB account and life insurance benefit to several beneficiaries by allocating a percentage of the account to each named beneficiary. You can also name a secondary beneficiary who would receive payments if the primary beneficiary was no longer alive or if the primary beneficiary declined receiving the funds.
Here is how the beneficiary designations work for RPB retirement plan balances:
- If your spouse is your beneficiary:
- He or she would take over your account upon your death. The spouse would become the RPB participant under his or her social security number. There are no income tax issues until the spousal beneficiary takes a direct distribution of the pension account balance.
- The spousal beneficiary would have all of the same rights as the original participant. The spousal beneficiary can utilize any of the RPB distribution options.
- Parsonage exemptions that were declared by the original plan participant can’t be continued.
- The spousal beneficiary would be required to take IRS Required Minimum Distributions (RMD) based on his or her age.
- If your spouse is your beneficiary:
Distributions in excess of the RMD can be taken in accordance with RPB distribution rules. Distributions must commence when the spousal beneficiary attains the age of 70 ½ if he or she is retired.
- If your child or children are your beneficiary:
- Your child or children would become RPB participants. If your child or children are minors, (a person not of legal age) you must have a guardian or an administrator appointed before an account transfer or payment can be made.
- Benefits must be paid out over a period not exceeding five-years. The benefits would be taxable income to the children.
- Children can roll over their RPB accounts to an “inherited IRA,” which would defer income taxes on their RPB accounts.
- If a trust is your beneficiary:
- You must send a copy of the applicable sections of the trust that apply to RPB to the RPB office, including the signature page.
- Upon your death, a direct distribution would be paid to the trust.
- The payment to the trust would be taxable income, and the RPB will withhold 20% of the distribution as a Federal income tax withholding.
- If an organization or charity is your beneficiary:
- The RPB will pay out a distribution to an organization or trust based on your beneficiary form.
- The RPB will withhold the appropriate income taxes from the distribution.
A Note About the Life Insurance Beneficiary Form and Addendum:
Regardless of your current eligibility status for life insurance coverage, you must complete the life insurance beneficiary form and corresponding addendum when enrolling in RPB. Your beneficiary forms will remain on file in the event that you increase your retirement contribution to a minimum of 10 percent.
When you have completed your beneficiary designation forms, please mail your original forms to RPB’s office. We cannot accept a copy, electronic scan, or fax of the beneficiary designation forms. Your original beneficiary designation form will be countersigned by the RPB Plan Administrator, and a copy of the fully executed forms will be returned to you for your records.
Please contact our RPB office if you have questions about completing your RPB beneficiary designation forms.
Important Update Regarding Same-Sex Marriages
In June 2015, the Supreme Court ruled that same-sex marriage is legal nationwide. IRS tax rules state that a same-sex marriage validly entered into in any U.S. state or a foreign country will be treated as a marriage under federal tax laws. It should be noted that civil unions or domestic partnerships that are not identified as “marriages” do not count under the IRS rules.
Please note the following:
- Couples who have entered into same-sex marriages will now indicate that they are married on the RPB beneficiary forms. If you are currently legally married, please complete new beneficiary forms to update your status if needed. Beneficiary forms are available here.
- A same-sex married beneficiary will receive the same tax treatment as a heterosexual married beneficiary.
- A same-sex spouse will be required to consent to distributions from the Plan the same as is required of a heterosexual spouse.
- Qualified Domestic Relation Orders (“QDROs”) must be completed for same-sex divorces. As with heterosexual married couples, a QDRO is the only legal document that will be accepted to divide an RPB account in the event of a divorce.