457 Without Designated Beneficiary

Submitted by Steve Booren on Fri, 2016-04-08 17:40

Alan w/Ed Slott previous responded to this inquiry:
Now deceased husband – passed away 10+ years ago- had a 457 that surviving spouse recently discovered. Plan Administrator (PA) does not have a beneficiary on file – either misplaced or never listed we are not sure. Plan default is to Estate. PA originally told spouse that she is able to roll these assets into an IRA in her name. She has completed all PA documents required to move the assets into an Inherited Estate IRA then to a newly established – with the PA- IRA in her name. Spouse has also provided court documentation of her position as Personal Representative and surviving spouse to PA. PA if now telling her the assets cannot be rolled to her IRA.
Alan indicated that the IRS has consistently ruled in favor of rollover to spouse IRA in these situations.
PA is asking for PLRs that will support their consideration in allowing these assets to move to spouse IRA.
Does anyone know of PLRs that address this situation?
Thank you



Submitted by Alan - IRA critic on Sat, 2016-04-09 01:06

  • Here is a link of interest:  http://www.actec.org/resources/request-for-revenue-ruling-spousal-rollovers-irc-sections-402c-and-408d3/
  • To further clarify prior posts, there have been PLRs allowing this, however there are variables with respect to the amount of control by the surviving spouse. For example, is the spouse the sole beneficiary under the will, and also executor?  Is there a will or intestate situation?
  • Another variable is that many of these PLRs involve IRAs, but some also address qualified plans. To clarify my prior post, Notice 2007-7 does not allow direct rollovers to an inherited IRA for an estate, only for designated beneficiaries and qualified trusts. That means that a PLR in this situation would have to authorize a rollover from the plan to an owned IRA, with no inherited IRA to remove the plan from the chain of events. There is less control of an inherited employer plan than an inherited IRA because the employer plan can make distributions based on plan provisions without beneficiary authorization. That would require the PLR to include not only rollover authorization but the 60 day rollover deadline would have to be extended since PLRs take much longer than 60 days.
  • I would also be sure the plan has substantiated that the surviving spouse is NOT the default beneficiary of the plan as is the case with many plans. An ERISA plan would be required to have the surviving spouse as default beneficiary, but this is not an ERISA plan. If the surviving spouse were the default beneficiary all these other technicalities would be eliminated.

Submitted by Bruce Steiner on Sun, 2016-04-10 01:09

See my articles on this in the October 1997 issue of Estate Planning, http://kkwc.com/wp-content/uploads/2015/04/AR20050125164755.pdf , and in the June 2015 issue of Trusts & Estates, http://kkwc.com/wp-content/uploads/2015/08/IRA-Rollovers-Making-this-option-possible.pdf .

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