News Releases
IRS Changes Position on Non-Spouse Beneficiary Rollovers from
Plans
October 24, 2007
IRA Update from Ed Slott
IRS Changes Position on Non-Spouse
Beneficiary Rollovers from Plans
Beginning in 2008, plans MUST allow direct rollovers for
beneficiaries
The Pension Protection Act of 2006 included a provision that would permit non-
spouse plan beneficiaries to do direct transfers from the plan to a properly titled
inherited IRA and take stretch distributions over their lifetimes instead of being
subject to the harsh payout rules of most company plans. This provision
became effective in 2007.
The purpose of the provision was to allow non-spouse plan beneficiaries the
same ability to stretch post-death distributions over their lifetime as if they
inherited from an IRA. That was the plan. But in January 2007, IRS issued Notice
2007-7 which stated that the provision was not mandatory for plans. This
created confusion and controversy and took the wind out of sails of this
provision. This was contrary to what Congress intended. Congress realized
this and has proposed a technical correction to the law stating that the plans
MUST allow the non-spouse direct rollover to an inherited IRA.
In light of the pending Congressional technical correction, IRS reversed its
position and now says that the non-spouse rollover provision will be
mandatory beginning in 2008.
IRS posted the change on its website
Here is the link:
http://www.irs.gov/retirement/article/0,,id=173372,00.html
Or click here:
2007 Interim and Discretionary Amendments
§ 402(c)(11) [Discretionary]:
PPA ’06 § 829(a)(1) added § 402(c)(11) to allow nonspouse beneficiaries to roll over
distributions from a qualified plan to an individual retirement plan.Nonspouse
beneficiary rollovers are an optional plan provision for 2007.See, Notice 2007-7.
Pursuant to an impending technical correction, nonspouse beneficiary rollovers will
be required for plan years beginning on or after January 1, 2008 (emphasis added).
See, section 9(e) of S. 1974, the Pension Protection Technical Corrections Act of 2007,
as introduced in the Senate on August 2, 2007 and section 9(e) of H.R. 3361, the
Pension Protection Technical Corrections Act of 2007, as introduced in the House of
Representatives on August 3, 2007
-by Ed Slott, Copyright © 2007
*******************
Look for more details in “Ed Slott’s IRA Advisor”
By Ed Slott © 2007
Ed Slott’s IRA Advisor
Subscription is $125/year, 12 issues; monthly.
To order call 800-663-1340 or order on-line at http://www.irahelp.com/newsletter.php?area=a.
IRS Changes Position on Non-Spouse Beneficiary Rollovers from
Plans
October 24, 2007
IRA Update from Ed Slott
IRS Changes Position on Non-Spouse
Beneficiary Rollovers from Plans
Beginning in 2008, plans MUST allow direct rollovers for
beneficiaries
The Pension Protection Act of 2006 included a provision that would permit non-
spouse plan beneficiaries to do direct transfers from the plan to a properly titled
inherited IRA and take stretch distributions over their lifetimes instead of being
subject to the harsh payout rules of most company plans. This provision
became effective in 2007.
The purpose of the provision was to allow non-spouse plan beneficiaries the
same ability to stretch post-death distributions over their lifetime as if they
inherited from an IRA. That was the plan. But in January 2007, IRS issued Notice
2007-7 which stated that the provision was not mandatory for plans. This
created confusion and controversy and took the wind out of sails of this
provision. This was contrary to what Congress intended. Congress realized
this and has proposed a technical correction to the law stating that the plans
MUST allow the non-spouse direct rollover to an inherited IRA.
In light of the pending Congressional technical correction, IRS reversed its
position and now says that the non-spouse rollover provision will be
mandatory beginning in 2008.
IRS posted the change on its website
Here is the link:
http://www.irs.gov/retirement/article/0,,id=173372,00.html
Or click here:
2007 Interim and Discretionary Amendments
§ 402(c)(11) [Discretionary]:
PPA ’06 § 829(a)(1) added § 402(c)(11) to allow nonspouse beneficiaries to roll over
distributions from a qualified plan to an individual retirement plan.Nonspouse
beneficiary rollovers are an optional plan provision for 2007.See, Notice 2007-7.
Pursuant to an impending technical correction, nonspouse beneficiary rollovers will
be required for plan years beginning on or after January 1, 2008 (emphasis added).
See, section 9(e) of S. 1974, the Pension Protection Technical Corrections Act of 2007,
as introduced in the Senate on August 2, 2007 and section 9(e) of H.R. 3361, the
Pension Protection Technical Corrections Act of 2007, as introduced in the House of
Representatives on August 3, 2007
-by Ed Slott, Copyright © 2007
*******************
Look for more details in “Ed Slott’s IRA Advisor”
By Ed Slott © 2007
Ed Slott’s IRA Advisor
Subscription is $125/year, 12 issues; monthly.
To order call 800-663-1340 or order on-line at http://www.irahelp.com/newsletter.php?area=a.
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