Inherited IRA
Can a non-spouse benefiaicry complete a rollover to an inherited IRA within 60 days after taking receipt from a company plan?
Here are the facts:
Gillete Employee died in Dec. 2002 and named her daughter beneficiary.
In 2009, the Gilette Plan transferred into P&G plan.
Non-spouse beneficiary took RMDs every year with exception of 2009.
Non-spouse beneficiary received a letter from P&G that under federal law account must be distributed by 12/31/10? Can anyone explain why? I assume its an error on the P&G side. If it was the 5 year rule interpretation, it should have been paid out by Dec 2007.
However, in November, a panicked non-spouse beneficiary took receipt of $21k cash, and $72k of P&G stock (cost basis of $30K). Taxes werre withheld. As Ed Slott would say, “I guess the toothpaste is out of the tube”.
If it was an error, can this be reversed?
Can she roll it into an inherited IRA within 60 days?
I assume she will be taxed on the full market value of P&G stock. I assume NUA was lost.
Love to hear some comments.
Thanks
Bill 😀
Permalink Submitted by Alan Spross on Fri, 2010-12-17 02:49
I have no idea regarding why the plan had to be distributed, but it sounds like a plan requirement rather than IRS requirement. They may also mean “transferred out of the plan” rather than actually distributed to the beneficiary. If they misled her, she might want to pressure them to pay for an IRS letter ruling to allow her to rollover the funds. There are no general exceptions that could otherwise be used to reverse the distribution the beneficiary requested.
Also, you are correct that the beneficiary RMDs constitute intervening distributions and erased NUA as an option to reduce the tax hit.
Permalink Submitted by [email protected] on Fri, 2010-12-17 16:23
Thanks for the reply. I assume the 60 day rollover window associated with direct rollovers is non-existent for inherited IRAs.
Thanks again for all your help.
Permalink Submitted by Alan Spross on Fri, 2010-12-17 16:30
Right, I think you meant “associated with INdirect rollovers”. Yes, this does not apply when the funds are not rollover eligible to begin with.
I should probably have indicated the letter ruling would allow the funds to be restored to the inherited IRA, rather than referring to the desired result as a rollover. Chances are also better the sooner the beneficiary takes action, if it makes sense for them to do do. Also, they should not use the money for any current short term expenses which helps establish that they really did not want the distribution in the first place.