Another very confusing area. The participant was covered by a life insurance contract held in the plan. Upon his death, his spouse received life insurance benefits, which are clearly non-taxable and therefore cannot be rolled over. All PS-58s were reported.

1. Is it true that the difference between the cash surrender value and any basis is taxable, and therefore is rollover eligible? Or I am completely confused?

2. The balance of the account (non-insurance portion) would be rolloer eligible, correct?

2. If both (1) and (2) are rolled over, there would be no 20% withholding, correct?

3. Are there cites for this? I am coming up empty.

Many thanks.

See attachment if this helps !!!!

The at-risk portion is tax-free; that's the face value (proceeds) minus the cash surrender value. In addition, the cumulative PS-58s are tax free. I think that equates to what you said in #1.

Everything else is rollover eligible, and no WH if it is rolled over.