Skip to main content

You are here

Foundation as 403(b) Beneficiary

Q: Recently, a wealthy participant in a 403(b) plan died and had elected his foundation as his beneficiary. His spouse had signed a waiver, and the beneficiary form is on file.

The foundation does not have a beneficiary, but the deceased participant's daughter is president of the foundation's board. She had signed the application for a lump sum distribution on behalf of the foundation. It was treated it as a taxable distribution to the foundation, subject to 20% withholding. The check was made payable to the foundation. Was this handled correctly?

A: Note that there is no mandatory 20% withholding for distributions that are not made to a natural person because those distributions are not eligible for rollover treatment. Other than that, it would appear the distribution was handled correctly.