Tom Posted December 20, 2022 Share Posted December 20, 2022 Client had a DB plan and terminated it and rolled his balance to his 401(k) plan. This was not a merger and transfer. It was a termination and he electively rolled to his 401(k) plan, waived annuity, spouse waived annuity. We are showing it in the 401(k) records as an unrelated rollover. Now he wants to do a big in-service distribution to a Roth IRA. He is 57. the plan document allows for in-service distribution of rollover source funds at any time. I asked the former actuary who says the DB rollover lost its nature as pension when electively rolled into the K plan and so in-service is allowable. Part of the rollover source is SEP as well. And so the same question applies to in-service from a rollover source that resulted from a former SEP. Summary - can a 57 year-old can he take as in-service part of his 401(k) rollover account which resulted from a terminated DB plan? Thank you! Tom Link to comment Share on other sites More sharing options...
pmacduff Posted December 20, 2022 Share Posted December 20, 2022 My two cents and to quote some famous people on the boards..."what does the plan say"? I would think if the DB and or SEP balances are effectively "rollover" balances in the 401(k), then unless the Plan Doc states something different for the origin of the rollover source funds, the rollover assets can be rolled out according to the plan in-service provisions for that money type. Todd Flessner and Luke Bailey 2 Link to comment Share on other sites More sharing options...
Popular Post CuseFan Posted December 20, 2022 Popular Post Share Posted December 20, 2022 For the DB R/O - absolutely if current plan allows distribution of rollover balances at any time. This amount had already experienced a distributable event and all the conditions to distribute were satisfied. However, since the participant is not 59 1/2 this would be subject to 10% premature distribution tax if not rolled over to an IRA. Rollover to a Roth IRA would be taxable, obviously, but not subject to the penalty tax. I think the SEP rollover is treated similarly. Jakyasar, Luke Bailey, Lou S. and 2 others 5 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now