pmacduff Posted April 20, 2015 Share Posted April 20, 2015 I found some prior threads but most were 7+ years old and dealing with non-spousal beneficiaries. I have a spousal beneficiary. It appears that if he rolls over the balance of the account to a traditional IRA then he'll receive the 1099-R with a Code of 4G. If that happens this year (the year of death) then the 1099-R for the loan offset will go under the deceased participant's name/SSN and is part of her final personal income. My question is...does the 10% "early distribution" penalty apply in this case to the loan offset? I'm assuming that the 1099-R won't be coded with a "4" because that portion is not a death benefit but rather a loan offset under the decedent. Any thoughts appreciated! Link to comment Share on other sites More sharing options...
Lou S. Posted April 20, 2015 Share Posted April 20, 2015 I would assume the loan would be coded 4 as it is an offset and not a default. If it is treated as a default after death does the form allow for code 4L? I think it is pretty clear under any reasonable interpertation of the rules that the 10% penalty does not apply in this case. Link to comment Share on other sites More sharing options...
QDROphile Posted April 20, 2015 Share Posted April 20, 2015 Why not section 72(t)(2)(A)(ii)? Link to comment Share on other sites More sharing options...
pmacduff Posted April 21, 2015 Author Share Posted April 21, 2015 Thank you both. After a reread of that code section I see also that the spouse would not pay the 10% penalty on his portion even if he takes the cash instead of rolling it over. That will be most helpful to him at this difficult time. Link to comment Share on other sites More sharing options...
Appleby Posted April 26, 2015 Share Posted April 26, 2015 If it is treated as a default after death does the form allow for code 4L? Yes Life and Death Planning for Retirement Benefits by Natalie B. Choatehttps://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/ www.DeniseAppleby.com Link to comment Share on other sites More sharing options...
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