Participant took qualified corona virus distribution in November 2020 from his 401k plan.
Participant died in 2022 having not repaid any of the distribution.
Widow has funds to repay the distribution but custodian said she cannot roll the funds back to her deceased husband’s 401k account.
Q – Is there any way she can repay the distribution and amend tax returns and get tax money back?
Thanks
Howard
Howard, upon further investigation the IRS has approved PLRs which allow a surviving spouse to roll over distributions made prior to spouse’s death, but none of these involved CRDs. Nonetheless, the fact that the allowed rollover period for the decedent is still open (3 years from date of CRD) might be helpful. While the widow could ask the 401k administrator to accept the rollover and confirm that she would still be treated as the beneficiary of that 401k (which is likely per ERISA requirement that the spouse is the beneficiary), the 401k will likely refuse unless they have some experience with the IRS regarding post death CRD spousal rollovers. Or the widow could make this request of an IRA custodian, again a long shot. If both decline as is likely, if the amount is large enough to justify the time and expense of an IRS letter ruling request, the widow could consider that avenue. Again, this is not impossible but a long shot that should probably not be considered unless there is some large perceived advantage.
I obtained one of them — PLR 201514020: https://www.irs.gov/pub/irs-wd/201514020.pdf .Bruce SteinerKleinberg, Kaplan, Wolff & Cohen, P.C.500 Fifth AvenueNew York, NY 10176(212) [email protected]
Permalink Submitted by Alan - IRA critic on Tue, 2023-09-26 22:15
The CARES Act does not include any provisions for a beneficiary of the participant to repay a CRD to an inherited plan, as it states such rollovers can only be done to plans eligible for receive rollover contributions and there is no such ability to receive a rollover by a surviving spouse or other plan beneficiary. In any event widow is now filing single and will likely benefit from reduced future RMDs at the single tax rate, while the CRD was taxed at the lower joint return rates. Therefore, even if this was allowed, it may not have been a beneficial decision.
Permalink Submitted by Howard Hook on Tue, 2023-09-26 22:29
Thanks as always Alan. Much appreciated.Howard