New Mandatory Non-Spouse Rollovers
We can all agree that the IRS caused major problems by originally making the Non-Spouse Rollover provision of the PPA optional. So my question is, how does these new changes help me out. Since the change only mandates rollovers beginning January 1, 2008.
My sister passed away in 2006 and I inherited two retirement plans. I have been trying to get the two plans to do a non-spouse rollover for this entire year.
Plan 1 allowed a life expectancy distribution and I have taken the first distribution this year. However, they finally decided October 2, 2007 that they will NOT adopt rules allowing Non-Spouse Rollovers.
Plan 2 only allows five year distribution and I have not yet taken any distributions. They did notify me that they have adopted rules effective January 1, 2007 allowing Non-Spouse Rollovers. They have told me to contact them After Decemeber 5, 2007 to do the rollover. Nothing like waiting to the last minute.
So my questions are as follows.
Plan 1. Can I take a rollover next year even though the rollover will not happen by the end of the year following my sisters passing? Since the life expectancy distribution has been established and the first distrubtion taken properly.
Plan 2. What happens if the they continue to drag their feet past December 31, 2007. Am I screwed or is there anything I can do? Should I immediately take a distribution equal to single life expectancy to preserve any rights? Can that cause any harm.
Can you believe these major corporations acting like this? You would think it would be to their benefit to remove me from their plans.
Permalink Submitted by Al Fry on Sun, 2007-11-11 19:32
It seems to me you are ok on Plan #1, since you took a distribution equal to the RMD in 2007, then the Direct Rollover will occur, with RMDs to follw the pattern set foth in the plan. For Plan #2 I would suggest that you decide on the custodian you want now, then open a “shell” inherited IRA, and then sign the transfer forms for them to get the transfer done. You may have some additional claim forms to sign with th QRP, however you’ll have all the major paperwork completed, and I would think a transfer could be completed and the first RMD out to you by the middle of December.
Permalink Submitted by William Tuttle on Sun, 2007-11-11 23:57
Are you saying that rollovers can occur even after the year after the year of death. As long as the life expectancy distribution was already established and can be continued.
The one piece of information that I left out is that I already have an Inherited IRA. In fact the IRA and the two retirement plans are all at the same custodian. So clearly the trustee-trustee transfer should be quick in this case.
Permalink Submitted by Al Fry on Mon, 2007-11-12 00:36
Alan is more of a student of this issue than I am, however I think you are ok. We actually did some of these with deaths in 2005, where they amended the plans in 2006, took an RMD in late 2006, then the Direct Rollover in 2007. These may not have been in 100% with the letter of the law, however they were certainly in compliance with the spirit. These are not really much unlike the “Plan Distributed Annuities” that we have been doing since 2002 for non-spouse benes. Those are being administered exactly like inherited IRAs.