Our understanding is that the “date” referenced in that section is the date on which the deceased owner’s beneficiaries must take their first distribution from the IRA — whether the distribution is a full distribution of the account or the first of many periodic requirement minimum distributions (RMDs).

The Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA) requires tax-deferred retirement accounts to be reported and remitted to the Treasurer on the later of:

1. Three years after the date that a communication is returned undelivered (RPO) or, if re-sent within thirty days, the second RPO, or
2. Three years after the apparent owner reaches the age of 70½ years, or one year after the date of mandatory distribution following the apparent owner’s death, whichever is earlier.

The “the date of mandatory distribution following death if the Internal Revenue Code requires distribution to avoid a tax penalty” referred to in paragraph (2) above would be the first date in which an IRA beneficiary is required to take a distribution from the deceased owner’s IRA — in other words, the first date in which IRA funds must be distributed in order to avoid tax penalties.

The timing of this date will depend on a number of factors, including the type and identity of the beneficiary, the deceased owner’s age at death, language in the IRA plan documents, and other factors. Generally, after an IRA owner dies, the beneficiary must either take a distribution of the entire IRA within five years after the owner’s death, or take the first of many periodic RMDs no later than one year after the owner’s death. Special exceptions apply when the beneficiary was the deceased owner’s spouse. Consequently, if an IRA owner dies, we recommend consulting the IRA plan documents and the IRA distribution rules to determine when the first required distribution will occur for each individual case.

For resources related to our guidance, please see:

• Illinois RUUPA, 765 ILCS 1026/15-202 (“When tax-deferred retirement account presumed abandoned. (a) Subject to Section 15-210, property held in a pension account or retirement account that qualifies for tax deferral under the income-tax laws of the United States is presumed abandoned if it is unclaimed by the apparent owner after the later of:
  • (1) 3 years after the following dates:
    • (A) except as in subparagraph (B), the date a communication sent by the holder by first-class United States mail to the apparent owner is returned to the holder undelivered by the United States Postal Service; or
    • (B) if such communication is re-sent within 30 days after the date the first communication is returned undelivered, the date the second communication was returned undelivered by the United States Postal Service; or
  • (2) the earlier of the following dates:
    • (A) 3 years after the date the apparent owner becomes 70.5 years of age, if determinable by the holder; or
    • (B) one year after the date of mandatory distribution following death if the Internal Revenue Code requires distribution to avoid a tax penalty and the holder:
      • (i) receives confirmation of the death of the apparent owner in the ordinary course of its business; or
      • (ii) confirms the death of the apparent owner under subsection (b).”)

• IRS FAQs, Retirement Plan and IRA Required Minimum Distributions (“(1) What are Required Minimum Distributions? . . . When a retirement plan account owner or IRA owner dies before [Required Minimum Distributions] RMDs have begun, different RMD rules apply to the beneficiary of the account or IRA. Generally, the entire amount of the owner’s benefit must be distributed to the beneficiary who is an individual either (1) within 5 years of the owner’s death, or (2) over the life of the beneficiary starting no later than one year following the owner’s death.”)

• Publication 590-B (2017), 5-year rule (“The 5-year rule requires the IRA beneficiaries to withdraw 100% of the IRA by December 31 of the year containing the fifth anniversary of the owner’s death. For example, if the owner died in 2017, the beneficiary would have to fully distribute the plan by December 31, 2022. The beneficiary is allowed, but not required, to take distributions prior to that date. The 5-year rule never applies if the owner died on or after his or her required beginning date.

Individual designated beneficiaries.

The terms of most IRA plans require individual designated beneficiaries to take required minimum distributions using the life expectancy rules (explained earlier) unless such beneficiaries elect to take distributions using the 5-year rule. The deadline for making this election is December 31 of the year the beneficiary must take the first required distribution using his or her life expectancy (or December 31 of the year containing the fifth anniversary of the owner’s death, if earlier).

Beneficiary not an individual.

The 5-year rule applies in all cases where there is no individual designated beneficiary by September 30 of the year following the year of the owner’s death or where any beneficiary isn’t an individual (for example, the owner named his or her estate as the beneficiary).”)