pretax pension plan to Roth bene IRA ?
we have a client that inherited pension funds from father . it is all pretax and she is wondering if she can put that into a bene Roth IRA.
I know if it was an IRA inherited then it must be roth to bene Roth or IRA to bene IRA.
what about in this case?
Permalink Submitted by Alan Spross on Tue, 2011-02-01 17:38
Yes, a non spouse beneficiary can convert a qualified plan to an inherited (not an owned) Roth IRA. She must still take RMDs from the inherited Roth, but she has an opportunity here to convert that she would not have if she had inherited a traditional IRA.
Permalink Submitted by Peter Lingane on Tue, 2011-02-01 17:40
It is probably possible to convert an inherited pension to a Roth IRA. See Choate (2011) section 4.2.05 for details.
Permalink Submitted by Alan Spross on Tue, 2011-02-01 17:56
Note that under WRERA (Dec, 2008), the option for non spouse beneficiaries to convert a qualified pension plan to an inherited Roth IRA was broadened to allow the beneficiary to do this by indirect 60 day rollover subject to mandatory 20% withholding since these are now considered eligible rollover distributions.
This represents a rather unexpected departure from the IRA rule that a non spouse beneficiary can only move funds by direct transfer. Accordingly, the ability to convert to an inherited Roth is unique and so is the ability to do this by indirect rollover if desired. Of course, the 20% withholding would have to be replaced to complete a full rollover. Note that the inherited pension plan must be a qualified plan.