457b -> beneficiary IRA
I have a client that is the beneficiary of his uncle’s estate. The uncle passed in ’06. At the start of this year, a 457(b) deferred comp plan was discovered in the uncle’s name. We want to roll this annuity into a beneficiary IRA for the client and extend it over the client’s lifetime. The issuer of the annuity, MetLife, is trying to tell us that after one year, they cannot roll the proceeds to a beneficiary IRA. Is there any reason why they cannot do this?
Thanks in advance!
Alan
Permalink Submitted by Alan Spross on Fri, 2009-09-11 19:40
I assume this is a government 457b plan or the rollover cannot be done. Did the uncle pass before or after his RBD? If prior, the stretch may not be available under the terms of the 457b plan.
However, the above does not affect the offer of a direct transfer to an inherited non spouse IRA account. These transfers were optional for plans up until plan years beginning after 12/31/09, and then become mandatory. I recommend the client request access to a supervisor or senior recourse at Metlife and first inquire if the prior advice is correct, and if so, if the supervisor is aware of the provision in WRERA which makes Sec 829 of the PPA mandatory for the next plan year. Also should determine when the next plan year begins. If 1/1/2010, it may simply be necessary to wait until January, and then submit a formal request for the transfer to be made to an inherited IRA set up to receive the transfer.
Back to the lifetime stretch issue, if the 457b plan REQUIRES the 5 year rule for deaths prior to the BBD, because of the delayed transfer, the inherited IRA will have to default to the RMD requirement of the 457b plan. This is only an issue if uncle passed prior to RBD.
Here is a link to Sec 829 of the PPA. Scroll down to Sec 829. This is the clause that becomes mandatory for 457b plans starting with the next plan year per WRERA signed last December by Bush:
http://fuguerre.googlepages.com/PPA.htm#ppa812
Permalink Submitted by Alan Myers on Fri, 2009-09-11 20:51
Many thanks for the info! I guess my next step is to get the guidelines from the Plan Document to see if a stretch is allowed as the uncle had not started taking his RMD yet. In fact, the uncle died at a very early age (age 48).
I am actually dealing with a supervisor in the Research department who still seems to think there is a one-year time limit to rollovers such as this. He has requested that I fax him any information regarding the laws and IRS determination letters that back up my contention this is legal.
Again, many thanks for this very helpful information!
Alan