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If the 403(b) plan's provisions have the 5 year rule as the default provision if the beneficiary does not elect the life expectancy option then she is locked into the 5 year rule. However, if the plan's default provision is the life expectancy option, then there still may be an opportunity to spread the distributions over her life expectancy. If the life expectancy option is available, then she missed the 2007 required distribution and would be subject to the 50% penalty on that amount. However, the IRS may waive the penalty if the error was due to reasonable cause.