Inherited 457(b) Plan

Submitted by Todd Martin on Mon, 2020-05-04 22:54

Hello,

I have a client that recently inherited a 457(b) plan from their father. This client already has a Beneficiary IRA established (also from her father) that my firm manages on her behalf. Are there any restrictions that prevent us from rolling over the inherited 457(b) plan into the Beneficiary IRA?

Thank you,

Todd



Submitted by Alan - IRA critic on Tue, 2020-05-05 01:34

Historically, inherited accounts could be combined by direct transfer if they both were inherited from the same original owner decedent, and the RMD divisors are the same. However, the Secure Act applies to IRAs inherited starting in 2020, but not to govt plans until 2022. Therefore, if father passed in 2020, client is subject to the 10 year rule for the inherited IRA with no annual RMDs, but can use LE on the 457b and the two accounts cannot be combined. Conversely, if father passed prior to 2020, the accounts could be combined based on the first sentence above.

Submitted by Todd Martin on Wed, 2020-05-06 22:17

I left out the father passed in October of 2019 so my client would be grandfathered into the life expectany ‘stretch IRA’ distribution option. We will proceed with consolidating the 457(b) into the Inherited IRA account per your confirmation. Thank you again for the help.Regards – Todd

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