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Inward rollovers TO a qualified plan by


Jerry Erisa

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a former employee's beneficiary?

Has anyone seen this in practice?

While we always wish to accommodate legitimate client wishes, this proposed amendment request borders, if not leaps over, into "non reliance" territory!?

All of a sudden, we could be (?) accepting de-facto "participants" by virtue that their inward rollover money could be (?) in the plan, regardless if they never worked for the Plan Sponsor.

Thank you for your thoughts and comments!

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Does the plan have self esteem problems? Employers have plans for the benefit of employees, and former employees probably only because ERISA requires it. You have identified some reasons not to go beyond the convention of allowing rollovers into the plan only by employees at the time of rollover. So don't.

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I might phrase it a bit more softly, but the conclusion "don't" is correct. While you might be able to construct the suggested rollover, it's probably not advisable.

- The plan no longer has a relationship to the recipient once a complete distribution has been made (assuming no errors, etc.)

- Since the plan is intended for the "employees and their beneficiaries" (ERISA section 2), the beneficiary in the original post may not have a relationship that permits any participation in the plan.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Ok,...

....... now the request is to allow, "participants who are former employees, and these (former employee) participants' beneficiaries.. to have an inward rollover INTO the qualified plan.

But, I am still concerned as this does not appear to be "pre-approved" language.

If it is not pre-approved language, I may be losing "reliance".

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Since there is no requirement that a qualified plan must accept rollovers into the plan, the plan has discretion as to whether it will accept rollovers and from which class of persons. A plan is not required to accept a rollover from a former employee who has not taken a distribution of the benefits from the plan or from that employee's beneficiary.

mjb

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Nonspouse beneficiaries cannot rollover assets into a qualified plan. Only a spouse beneficiary can, and in those cases, it would be to the spouse's own account under a plan where he/she is a participant. ( I hope I understood the question. If not, please let me know)

Life and Death Planning for Retirement Benefits by Natalie B. Choate
https://www.ataxplan.com/life-and-death-planning-for-retirement-benefits/

www.DeniseAppleby.com

 

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