One of the great things about the holidays is catching up on reading, like the IRS Retirement News for Employers.
Non-spousal rollovers were not available before the new Pension Protection Act provision, which became effective for distributions made after December 31, 2006. After PPA, plans were permitted to allow non-spouse beneficiaries the option of rolling over distributions, but plans were not required to provide that option. The Worker, Retiree and Employer Recovery Act of 2008 makes the non-spousal rollover provision mandatory for plan years beginning after December 31, 2009.
Plans will have to offer the rollover alternative to non-spouse beneficiaries receiving plan death benefits. Plans are required to offer a non-spouse beneficiary the option to do a direct rollover (a trustee-to-trustee transfer) of an eligible rollover distribution to an inherited IRA.
Plan administrators are required to give all non-spouse beneficiaries a written notice explaining the direct rollover rules and the mandatory 20% income tax withholding rules for distributions not directly rolled over. This explanation should be provided to the non-spouse beneficiary no earlier than 180 days and no later than 30 days before making the distribution. Just in time for the holidays, sample notices to non-spouse beneficiaries are available in IRS Notice 2009-68.
So as we start out 2010, add the stocking stuffer of model notice 2009-68 to your plan administration toolkit.
And, if you have not looked at the new required amendments for 2010, consider invitign your legal counsel to lunch for information about other law-related gifts for your Plan.
