beneficiary 403b unable to rollover….Help
How is it that a particular financial institution has in its paperwork that a non spousal beneficiary cannot do a direct rollover and cannot rollover the payment themselves………..The only way to get the some monies out is with an election they provide while leaving all the monies there……….she has elected to stretch but it has to be with the original institution……..How can that be allowed as well as in the clients best interest that she now is attached to this intitution for the next 50 yrs. The only way that can change is if she withdraws [b]ALL[/b] the money which really isnt a consideration, as well as not being in the clients best interest….Please Help me and the client…….I thought with the PPA of 2006 and the amendments after that , that something like this couldnt occur…Michael…..While it used to be plan specific I thought it then became mandated and changed to allow for more rollovers for the Non spousal beneficiaries……….Thanks ..Looking forward to any responses…….
Permalink Submitted by Alan Spross on Wed, 2009-10-14 21:18
WRERA should solve this problem. Following is copied from that bill amending Sec 829 of the PPA to make the non spouse direct rollover mandatory for plan years starting after 12/31/09. So, only a couple more months to wait. Prior to this bill, the rollover was optional for plans.
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(f) AMENDMENTS RELATED TO SECTION 829.—
(1) Section 402(c)(11) of the 1986 Code is amended—
(A) by inserting ‘‘described in paragraph (8)(B)(iii)’’
after ‘‘eligible retirement plan’’ in subparagraph (A), and
(B) by striking ‘‘trust’’ before ‘‘designated beneficiary’’
in subparagraph (B).
(2)(A) Section 402(f)(2)(A) of the 1986 Code is amended
by adding at the end the following new sentence: ‘‘Such term
shall include any distribution to a designated beneficiary which
would be treated as an eligible rollover distribution by reason
of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or
457(e)(16)(B), if the requirements of subsection (c)(11) were
satisfied.’’
(B) Clause (i) of section 402(c)(11)(A) of the 1986 Code
is amended by striking ‘‘for purposes of this subsection’’.
(C) The amendments made by this paragraph shall apply
with respect to plan years beginning after December 31, 2009.
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Permalink Submitted by Michael Hassett on Wed, 2009-10-14 22:32
Alan, Thank you for starters, but we seem to be running into a road block with the financial institution……Should I be asking that we be allowed to do a trustee to trustee transfer of the assetse?.SInce in their docs they specificaly say no non spouse rollovers….I understand that maybe the words I use might have to change when i ask the question about trustee to trustee
Everything they seem to be telling me is that the only way we(the client )can separate from them is to withdraw the monies…….otherwise we must take the options they offer us only………
It seems very restrictive and borders on the illegal……….
My next question is if they tell my i cannot do a trustee to trustee, do i then ask will it be allowed in January of 2010?.rollover or turstee to trustee?………I really appreciate all your help…………Looking forward to your response../thank You……….Michael
Permalink Submitted by Alan Spross on Wed, 2009-10-14 22:54
What they are telling you is within the requirements right now. But the requirements change in January if their plan is a calendar year plan. They MUST offer the direct rollover in January under the provision I posted. That legislation was signed by Bush on 12/21/2008.
And in January, the distribution still cannot be rolled over, so must be done with a direct trustee transfer. Do not let them issue a check made out to the taxpayer or it will become taxable and cannot then be rolled over.
Another issue to contend with is after the transfer is done, what RMD rules will apply? That depends on the year of death of the 403b owner. If the transfer does not get done until 2010, then the beneficiary can use life expectancy for RMDs only if the 403b owner passed in 2009. If they passed before 2009, the IRA will have the same RMD requirement that the 403b plan had, and that might be the 5 year rule in certain cases, but the 403b plan RMD provisions would pass to the inherited IRA,
Permalink Submitted by Michael Hassett on Thu, 2009-10-15 13:36
Last question, Can I ask that the assets be transferred to another 403b carrier with possibly less restrictive options and then do a trustee to truustee transfer to a decedent IRA?..Thank You again.Michael
Permalink Submitted by Alan Spross on Thu, 2009-10-15 18:39
If you can find a 403b that would accept a transfer, you could do that. But the plan would not be happy incurring the expense of setting up a new account when they are only going to have the funds a few days. It would be easier to wait until 2010 unless you are doing this because the decedent passed in 2008 before the RBD, and you need to transfer before year end to preserve the life expectancy RMD calculation.