I was just looking at publication 575 and came across some interesting wording. I makes it seem that even a non-designated beneficiary (of an employee that dies before his required beginning date) could elect the stretch instead of the 5 year distribution rule [i]if the plan terms explicitly say he can[/i]. But then again in Rule 2 it uses the word “designated” so maybe it still doesn’t.

Here is the wording (with some bold and italics added by me):

“Distributions after the employee’s death. If the employee was receiving periodic distributions before his or her death, any payments not made as of the time of death must be distributed at least as rapidly as under the distribution method being used at the date of death.
If the employee dies before the required beginning date, the entire account must be distributed under one of the following rules.
Rule 1. The distribution must be completed by December 31 of the fifth year following the year of the employee’s death.

Rule 2. The distribution must be made in annual amounts over the life or life expectancy of the [i][b]designated[/b][/i] beneficiary.

The terms of the plan may determine which of these two rules apply. If the plan permits the employee or the beneficiary to choose the rule that applies, this choice must be made by the earliest date a distribution would be required under either of the rules. Generally, this date is December 31 of the year following the year of the employee’s death.
If the employee or the beneficiary did not choose either rule and the plan does not specify the rule that applies, distribution must be made under Rule 2 if the employee has a designated beneficiary or under Rule 1 if the employee does not have a designated beneficiary.”

Any clarification on this?

Lee