Inherited Employer Plan Direct Transfer to beneficiary Must be done by year end?
In my Savvy Advisors book it says, A beneficiary must be given the option to do a direct transfer from employer plan to an Inherited IRA and must be done by year end of the year after the death of the plan participant. If that deadline is missed, the beneficiary must use the plan options even though the funds are in an inherited IRA.
My question is to confirm that this is still the case? And where does it say by 12/31 ??
My client says, he doesn’t see any dates to that effect.
Thanks very much!
Permalink Submitted by Alan - IRA critic on Tue, 2018-08-28 20:25
Yes, this is still the case and is documented in Q 17 of IRS Notice 2007-7. The wording indicates “by the end of the year” which is the same as indicating 12/31. Note that if the employer plan has adopted life expectancy, the inherited IRA RMD will also be based on LE. The danger is if the plan owner passed prior to his RBD, and the plan had the 5 year rule in force, missing the deadline would require the inherited IRA to also fall under the 5 year rule. The other factor in acting by this deadline is creation of separate accounts if there were multiple beneficiaries since the same deadline applies to separate account creation to avoid having to use the LE of the oldest beneficiary. If only one beneficiary, the separate account issue is moot, but avoiding the 5 year rule is still critical. None of these deadlines are likely to matter if the participant passed after his RBD and there was only one beneficiary.