3909 / What is the incidental benefit rule for qualified plans?

Qualified retirement plans exist primarily for payment of retirement benefits, although certain other benefits (e.g., death benefits) may be provided through the “incidental benefit rule” or “incidental death benefit rule.” This restriction commonly refers to two similar, but separate, rules.

One limits pre-retirement distributions in the form of nonretirement benefits such as life, accident, or health insurance ( Q 3830).

The second is a rule more properly referred to as the “minimum distribution incidental benefit (“MDIB”) rule.” The purpose of the MDIB rule is to ensure that funds are accumulated under a qualified plan primarily for distribution to employee participants as retirement benefits, and that payments to their beneficiaries are merely “incidental.”¹