Nonspouse beneficiary 403b Roth and Traditional split?
– 27 year old sole beneficiary of 403b from parent not of distribution age.
– I understand that a direct transfer to either an Inherited Roth IRA or Inherited Regular IRA is possible as the 403b is a qualified employer-sponsored plan.
– My question is whether the funds can be allocated to both a properly set up Inherited Roth [i]and [/i]an Inherited Regular IRA via two direct transfers whose sum is the total value of the 403b.
Thanks
Permalink Submitted by Alan Spross on Wed, 2009-01-28 20:08
Yes, they can be if the plan will do two direct rollovers. An indirect rollover is NOT an option for a non spouse beneficiary.
A plan is NOT required to offer multiple direct rollovers, and that presents a potential problem here. The following is from the IRS Regs:
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Q–10: Must the plan administrator allow a distributee to divide an eligible rollover distribution into two or more separate distributions to be paid in direct rollovers to two or more eligible retirement plans?
A–10: No. The plan administrator is not required (but is permitted) to allow the distributee to divide an eligible rollover distribution into separate distributions to be paid to two or more eligible retirement plans in direct rollovers. Thus, the plan administrator may require that the distributee select a single eligible retirement plan to which the eligible rollover distribution (or portion thereof) will be distributed in a direct rollover.
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Permalink Submitted by Brian Doyle on Wed, 2009-01-28 21:34
Thanks a lot Alan
Permalink Submitted by charles lore on Thu, 2009-01-29 01:29
By 2010 they will be required
Permalink Submitted by Alan Spross on Thu, 2009-01-29 03:43
Chuck,
I think you are referring to the att’d amendment in the WRERA:
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Allow rollovers by nonspouse beneficiaries of certain retirement plan distributions (Act sec.
829 and Code sec. 402(c)(11), (f)(2)(A))
The Act permits rollovers of benefits of nonspouse beneficiaries from qualified plans and
similar arrangements. The provision clarifies that the current law treatment with respect to a
trustee-to-trustee transfer from an inherited IRA to another inherited IRA continues to apply.
Under the provision, effective for plan years beginning after December 31, 2009, rollovers by
nonspouse beneficiaries are generally subject to the same rules as other eligible rollovers.
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However, this still does not require a plan to offer more than one direct rollover. A plan that only offers a non spouse only one direct rollover limits the beneficiary to one type of IRA transfer.
Permalink Submitted by charles lore on Thu, 2009-01-29 04:08
In looking at my notes for Natalies presentaion I wrote that beginning in 2010 a QRP must allow a non spouse bene to do a direct roll to inherited ira.. Unlike now where they do not have to. If the plan doesnt allow such a r/o it must be amended.. I believe we are saying the same thing?
Permalink Submitted by Alan Spross on Thu, 2009-01-29 04:48
Not exactly the same.
The Q&A I posted indicates that the plan must allow one direct rollover, but not two. The recent change made the non spouse transfer rules in 401(a)31 mandatory next year, but those Regs only require the plan to make one direct rollover, not more than one. Plans will hopefully agree to make more than one now that there will be a choice between a Roth and a TIRA, but even next year only ONE such direct rollover will be required.