401kPlan is now allowing rollover. but heres the prob!
I have a long question regarding a decedent IRA set up to receive non spousal 401k dollars from an inherited 401k which the plan has just allowed a rollover to occur ……Two problems…………dad died in 2004…..assets were in limbo (quadro) for two years.Account gets named correctly in 2006 … RMDs technically needed to be started in 2005.(Dec 31 the year following death of dad)…….Do you think we can take the RMDs for the previous 4 yrs and get back into RMD world while reporting to IRS we are taking the required RMDs for previous 4 yrs……..account wasnt in her name till 2006 and they didnt allow rollover of assets even though PPA of 2006 said plan specific,and since the administraor of existing 401k has just recently amended the current 401k plan to allow rollovers to occur. Help
Permalink Submitted by Alan Spross on Tue, 2008-10-28 19:42
Short answer is it depends on the original plan provisions and whether the employee passed prior or post his RBD.
Notice 2007-7, link below clarifies that if the transfer is not done by the end of the year following death, the plan provisions apply to the RMD requirement of the inherited IRA if employee died prior to the RBD. In addition, for deaths prior to 2005, there was no way to do the transfer in the following year, since these did not become available until 2007.
Scroll to Sec 829 in att’d link:
http://benefitslink.com/IRS/notice2007-7.pdf
If the above challenge is passed, and life expectancy is still an option under the plan, it should be under the inherited IRA. Here is where a recent PLR comes into play, PLR 2008 11028, link to Ed’s analysis follows:
http://www.financial-planning.com/asset/article/613061/saving-stretch.html
Note that the life expectancy stretch can be restored by taking the delinquent RMDs back to the beginning, but also the excess accumulation tax had to be paid. You would have to assess the cost of the 3 years of excess accumulation plus interest vrs the amount inherited and RMD based on beneficiary’s age to determine if it is worth it to pursue this.
Permalink Submitted by Michael Hassett on Wed, 2008-10-29 13:25
Appreciate your incite and clarity at explaining..Michael