Beneficiary of a non-spouse post-retirement death benefit from Boeing.

The document says he can roll it over to IRA or take a lump sum.
• If he rolls it over, wouldn’t he have to put it in an inherited IRA with up to 5 years to take distributions?
• If her takes a lump sum, would the IRS waive the 59 ½ early penalty? I know he will have to pay the taxes, but what about the penalty.

Here is some additional information, the letter leads you to believe it is handled like it would be if he were rolling over his own pension. It doesn’t mention inherited IRA anywhere in the document.

“As a non-spouse beneficiary you may elect to have this benefit paid directly to you or tolled over to an Individual Retirement Account (IRA) or eligible employer plan. Lump sum distributions from an IRS qualified plan are subject to a Federal Withholding tax of 20% unless the distribution is rolled over to an IRA or an eligible employer plan.”

Further down in the letter it says, “You will be taxed on a payment from the Plan if you do not do a rollover, you will also have to pay a 10% additional income tax on early distributions (unless an exception applies). However, if you do a rollover, you will not have to pay tax until you receive payments later and the 10% additional income tax will not apply if those payments are made after you are age 591/2 (or an exception applies).”

The exceptions are the usual IRA distribution exceptions. It looks like they put a non-spouse cover letter on a regular employeee distribtuion document. When I called the Pension Service Center they repeated what was in the letter. They didn’t know anything about an inherited IRA.

Thanks for you help,