Non spouse direct rollover from pension to IRA
I know there has been some discussion about non spouse rollovers being allowed. My understanding is that in 2008 they became mandatory that pensions MUST allow the rollover to an IRA for a non spouse beneficiary.
Is this the case and can someone cite the IRS ruling on it?
P.S. this is time sensitive as we are in the proces of trying to do the rollover now and the pension is balking at it.
Thanks,
Tim Estes, CFP
Permalink Submitted by Alan Spross on Fri, 2008-11-14 21:04
Tim,
Unfortuneately, the transfer is still not mandatory even though there was talk of making it so. That includes the IRS, but they officially have fallen back on their written release in Notice 2007-7. The following Q&A is copied from that Notice:
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Q-14. Is a plan required to offer a direct rollover of a distribution to a nonspouse
beneficiary pursuant to § 402(c)(11)?
A-14. No. A plan is not required to offer a direct rollover of a distribution to a
nonspouse beneficiary. If a plan does offer direct rollovers to nonspouse beneficiaries
of some, but not all, participants, such rollovers must be offered on a nondiscriminatory
basis because the opportunity to make a direct rollover is a benefit, right, or feature that
is subject to § 401(a)(4). In the case of distributions from a terminated defined
contribution plan pursuant to 29 C.F.R. § 2550.404a-3(d)(1)(ii), the plan will be
considered to offer direct rollovers pursuant to § 402(c)(11) with respect to such
distributions without regard to plan terms.
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Many plans are falling in line and offering the transfer, but for deaths that occurred in 2007, the transfer may need to be done by year end to avoid the 5 year rule if employee passed prior to their RBD. About all you can do is keep the pressure on, maybe advise them that they are now among the few plans that do not offer this transfer.