spousal rollover

Submitted by charles lore on Thu, 2009-01-01 17:58

I’m reading a text for a CHFC class and it says that if a husband dies after rbd and in yr of death did not take RMD from his QRP and wife under age 70 rolls to her ira .. there is NO requirement for a rmd he would have taken in yr of death had he lived. It says that the fact that she rolled to her own IRA satisfies the rmd he would have taken.

Cant find this in pub 590 and it doesnt sound correct to me. Can anyone clarify? Lastly what if wife was 75 yrs old?

Please note my example assumes the funds are in a company plan and he is retired. Would your answer be different if it was in his IRA?

Lets forget about 2009 new exception



Submitted by Denise Appleby on Thu, 2009-01-01 18:43

[quote=”[email protected]“]I’m reading a text for a CHFC class and it says that if a husband dies after rbd and in yr of death did not take RMD from his QRP and wife under age 70 rolls to her ira .. there is NO requirement for a rmd he would have taken in yr of death had he lived. It says that the fact that she rolled to her own IRA satisfies the rmd he would have taken.

Cant find this in pub 590 and it doesnt sound correct to me. Can anyone clarify? Lastly what if wife was 75 yrs old?

Please note my example assumes the funds are in a company plan and he is retired. Would your answer be different if it was in his IRA?

Lets forget about 2009 new exception[/quote]

That’s odd. The regs are clear on this. She must take the RMD for year of death and include it in her income. She cannot rollover the RMD that he was required to take.
The age of the beneficiary not matter for this purpose.

Same rules for IRA.



Submitted by charles lore on Thu, 2009-01-01 20:20

Thanks Denise for confirming what I was thinking. I will let author know about mistake.



Submitted by Alan Spross on Thu, 2009-01-01 23:09

Chuck,
You might check to see if the text may have been taken from a section discussing the difference between a plan RMD and a statutory RMD. For example, a plan can require that RMDs begin at 70.5, even though the statutory RBD is 4/1 following the year of retirement. If the decedent passed subject to the plan RMD, but was still working, then his spousal beneficiary could roll over that plan RMD. You cannot roll over a statutory RMD but you can roll over a plan RMD.

This is only a particular scenario under which the text could be correct.



Submitted by Denise Appleby on Fri, 2009-01-02 14:55

[quote=”[email protected]“]Chuck,
You might check to see if the text may have been taken from a section discussing the difference between a plan RMD and a statutory RMD. For example, a plan can require that RMDs begin at 70.5, even though the statutory RBD is 4/1 following the year of retirement. If the decedent passed subject to the plan RMD, but was still working, then his spousal beneficiary could roll over that plan RMD. You cannot roll over a statutory RMD but you can roll over a plan RMD.

This is only a particular scenario under which the text could be correct.[/quote]

But, according to Chuck’s explanation, the participant was past the RBD at the time of death. It appears then the RBD for the plan was April 1 of the year following the year the individual reaches age 70 ½.
It does not appear that the RBD could be later (past age 70 ½ if still employed, until April 1 of the year after retirement), since –he died while still employed and died after his RBD. If the RBD had been later , he would have died before the RBD.
Therefore, the RMD for the year he died is not rollover eligible [A-7 of §1.402(c)-2]



Submitted by Alan Spross on Fri, 2009-01-02 20:29

Perhaps there is an error in this notion of any difference between a plan RBD and the 401a9 RBD. See first “riddle” here from Natalie Choate. Is there a way to pull up that reference she cites? I do not know how to find it……….

http://www.ataxplan.com/choatesNotes/CNotesV9N1.pdf



Submitted by Denise Appleby on Sat, 2009-01-03 00:49

Natalie’s reference of 1.4.05. refers to her book. Shs has it nicely laid out in numbered and sub-numbered sections, which makes it an easy-to-use reference.

That section of her book further refers to Notice 97-75 Q&A 10 as the Cite for the position taken in 1.4.05… This can be found here http://www.irs.gov/pub/irs-drop/not97-75.pdf

I haven’t read 97-75 as yet. I am going to play a [i]best of out five [/i]game of scrabble with my kids…and will read it as soon as we are done.



Submitted by Alan Spross on Sat, 2009-01-03 05:14

I hope you remove the R,B and Ds from the scrabble game so the poor kids have a chance :).

Looks like Q&A 9 may also play into this, and perhaps this affected only those who reached 70.5 back then?????? And even if these were rollover eligible under 97-75, has there been another chance since that time the superceded the Notice on this issue? If so, Natalie may be missing it, since her “riddle” is less than 2 years old.

Happy New Year!
alan



Submitted by Denise Appleby on Sat, 2009-01-03 07:13

Oh Alan…those kids beat me real good 😆 . Good reason for a rematch though.

I think you were right in your first post. For 97-75, the language does seem to make it applicable only to employees who reached age 70.5 back then. But, the Final RMD regs appears to extend that provision to current employees. For instance, the preamble to the Final says [quote]“These regulations continue to incorporate, with some modifications, applicable previously issued guidance … and Notice 97- 75 (1997-2 C.B. 337)). To the extent not modified or superceded by these regulations, the guidance in Notice 83-23 and Notice 97-75 remains in effect. For example, if an employer uses the same required beginning date for all employees regardless of whether the employee has retired by age 70½, during the period before an employee retires, the employee may determine the portion of any distribution that is eligible for rollover using the statutory definition of required beginning date. [/quote]

So, it appears that [i]for purposes of the rollover rules[/i], a distribution to an employee who is still working for the plan sponsor is rollover eligible, regardless of age and regardless of the plan’s definition of RBD.

This would make the following statement correct
[quote=”chuck.lore”]I’m reading a text for a CHFC class and it says that if a husband dies after rbd and in yr of death did not take RMD from his QRP and wife under age 70 rolls to her ira .. there is NO requirement for a rmd he would have taken in yr of death had he lived. [/quote]

But the following would -technically- not be true ( or not applicable ), as there is no RMD to satisfy?

[quote=”chuck.lore”] It says that the fact that she rolled to her own IRA satisfies the rmd he would have taken.[/quote]



Submitted by Denise Appleby on Sat, 2009-01-03 07:26

Alan,

Remember that long discussion/post that we had a few months ago about RMDs and rollover eligibility? Do you recall if it had anything to do with this? I can’t find it.
Happy New Year to you and yours .

Denise



Submitted by Alan Spross on Sat, 2009-01-03 19:31

Denise, was this it?

http://www.irahelp.com/phpBB/viewtopic.php?area=&t=424&highlight=



Submitted by Bruce Steiner on Sat, 2009-01-03 22:54

Did the IRS really misspell “superseded” in the preamble to the regulations?



Submitted by Denise Appleby on Sun, 2009-01-04 10:47

Yes they did Bruce. 😳

Thanks Alan. This is it. I wanted to check for the conclusion .

Denise



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