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Rollover Ruling

Please note: This item is from our archives and was published in 2007. It is provided for historical reference. The content may be out of date and links may no longer function.

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The IRS ruled a nonspouse beneficiary of an inherited IRA may spread required minimum distributions (RMDs) from the IRA over his or her life expectancy so long as a rollover is completed before the end of the year following the year in which the plan participant died.

The rule, which applies to distributions made after 2006, is a change from prior law, which did not allow a nonspouse beneficiary to roll over any amount inherited from an IRA or other qualified plan. The change was included in the Pension Protection Act of 2006.

In Private Letter Ruling 200717023, the Service said that, for distributions made after 2006, plans may be structured to permit a nonspouse beneficiary of an inherited qualified plan account to make a trustee-to-trustee transfer of part, or all, of the deceased employee’s account balance in the qualified plan to an IRA. The owner of the rollover IRA is then subject to the distribution requirements of section 401(a)(9).

The letter ruling outlines steps a practitioner must follow to properly complete the rollover for a nonspouse beneficiary.

The ruling is available at www.irs.gov/foia/lists/0,,id=97705,00.html.