Hi,
Husband passed away earlier this year at age 52. He had a 401(k) from a former employer which was held at a major brokerage firm which also serves as the 401(k) plan administrator. I was the beneficiary, so I mailed the brokerage firm/administrator a death certificate. After receiving the death certificate, the brokerage firm/administrator automatically moved his 401(k) assets into a new 401(k) for me with the same brokerage firm under the same 401(k) plan. I don’t know if the new 401(k) is titled as my own 401(k) or an “Inherited 401(k) from my husband” or if it doesn’t matter – all I know is I sent in a death certificate as they requested, and his 401(k) assets were automatically moved into a 401(k) account of mine.

I then established an Inherited IRA with the same brokerage firm. I want to roll the above 401(k) assets into the Inherited IRA to take advantage of more investment choices while preserving the ability to withdraw funds from these assets without 10% penalty tax before 59.5.

Yesterday I called the 401(k) administrator and asked them to roll over the assets to my new Inherited IRA. Because both accounts are at the same firm, they typically do rollovers via an electronic journal, but in this case they said in the case of an Inherited IRA being the receiving account, they could not do the journal electronically and instead would have to mail me a check, which I could then take to the local office of the same brokerage firm to deposit into my Inherited IRA. I expect to receive the check tomorrow. I don’t know if it will be made payable to “Brokerage firm FBO My IRA” or “Brokerage firm FBO My Inherited IRA”. But I told them very clearly on a recorded line that I wanted to roll the money into my Inherited IRA and they said I would have to do this via a paper check and re-deposit. Rollover contributions are coded “DRC” by the brokerage firm when deposited…DRC means direct rollover contribution.

Worrying about what might go wrong when I bring the check in tomorrow, I just called the local office of the same major national brokerage firm. They said that there is no such thing as a DRC for an Inherited IRA. They said do DRC deposits all the time, but for regular IRAs not Inherited IRAs. They said Inherited IRAs are funded by trustee-to-trustee transfers, not by rollover contributions and that I cannot do a DRC into my Inherited IRA.

1. Do you think the person I spoke with at the local office is mis-informed?
2. Don’t I have a legal right to make a rollover contribution into my Inherited IRA as a former spouse? If so, do you think I just need to provide them with a letter of instruction and death certificate as supporting documentation?
3. I believe it is too late to cancel out the 401(k) distribution transaction. So if they won’t accept a DRC deposit into my rollover IRA, could I roll the check back into the 401(k) account from which it was just issued?
4. Any other ideas? It is probably too late to cancel the 401(k) distribution, but I want to somehow deposit the forthcoming check in my Inherited IRA to preserve the 10% penalty tax exemption.

Thank you!