Appleby

I sent an email to the author of the Notice and cc'd Luke. They are usually pretty good at calling back. Will keep you posted.

My take Can You Convert A Coronavirus-Related Distribution To A Roth IRA? Comments welcome

Apologies for being late to the party . I agree that one cannot spread the income from a Roth conversion over three years. The three year spread is available only to Coronavirus-related distributions. A Roth conversion is not a Coronavirus-related distribution- whether direct or indirect. Form 8915 is one of the sources that I also used to come to my conclusion. It does not permit Roth conversions.

Only one would apply. Would need to know: Year of death of participant Date of death of spouse Did spouse elect to treat account as own? if yes, when ?

Larry, the email you attached is full of errors. Please don't rely on it. I am going to call you.

It a actually switches to the 10 year, because the designated beneficiary died after02019. Had the designated beneficiary dies in 2019, the the successor beneficiary would continue the original beneficiary's LE payments.

Agree. The 25% is an increase of the 10%. Therefore, if the 10% does not apply, neither can the 25%

PS: Hope you are all staying safe and healthy ?

You might be right. But, remember we did not get one for the 1998 4 year conversion spread or the 2010 conversion spread.They were the usual 2/7. Also, by the time they get around to it, these distributions will have already been processed. Custodians/trustees will not be able to go back and recode them. But, the key is, even if they do, the OP can check 1 or 7 now-, and the 1 can be overridden with Form 5329. I agree 100% on the 1040 schedule.

Code 1 if under age 59 1/2. Code 7 if age 59 1/2 or older. This is a one time deal,. It is highly unlikely that the IRS is going to create an exception to the 1099-R reporting requirements for it. When the client files the tax return, Form 5329 would be filed to override the Code 1. Even if the IRS does say it should be Code 2, and the Custodian uses Code 1, Form 5329 would still be filed.

The question becomes, did the employer sign? While employer/admin signature is required, some of these custodians 'forget' to get the required authorization.

Agree. But, if he is already maxing out the salary deferral in the 401(k) with his employer, no need to do a 401(k) for the side business, unless he wants to for benefits not available under the SEP, such as taking loans. The 401(k)is more expensive to maintain - record-keeping, 5500 for >$250,000.

Hi Belgarath- your understanding is correct. Ideally, the plan should issue corrected 1099-Rs, showing the RMD amount as paid to the participant, and the balance as a direct rollover.

Hi Larry, I agree with your explanation, with one minor qualification. A nonspouse beneficiary can make a QCD from an inherited IRA, as long as the beneficiary that holds that IRA is at least age 70 1/2 on the day the QCD is made.

Was his wife a participant under the plan? Or, just a beneficiary ?

If this is still unresolved- contact Gary Lesser https://benefitslink.com/GSL/

Great question. The language does not appear to make any changes to the triggering event requirements. It appears therefore, that one must first be eligible to make withdrawal form the plan. Let's hope the IRS addresses your question.

Amending the plan is not required, just for her to transfer her account to you. She can establish her account with you, and transfer her balance to you, when permitted . She would need to provide you with a copy of the Form 5305-SIMPLE . So, for her account with you, the documents would be a copy of the Form 5305-SIMPLE that was used to establish the plan and your firm's SIMPLE IRA Adoption agreement ( Form 5304-S or Form 5304-SA). All new SIMPLE IRA contributions would need to be made to her old account ( because of the DFI rule under Form 5305-SIMPLE), so that would have to be kept open, and the contributions can then be transferred to the account with you, when permitted ( there might be restrictions on when amounts can be transferred- those, those are hardly ever instituted). Each employee is permitted to do this. The account with you would not be eligible to accept new SIMPLE contributions- only transfers and rollovers. A SIMPLE can be amended only as of January 1 of a year .The amendment should conform to the 60-day notice. So it might be too late for 2020. If the plan is amended to a Form 5304 , then all the participants would be permitted to choose their own custodian ( No DFI)

No. If she keeps the assets in the plan, her first RMD is due 12/31/2020. Anything before 2020 is an optional distribution.

I wish you were right FPGuy. The crux of the issue is the definition of a 'designated beneficiary' My reference to the spouse relates only to the IRS consistently permitting the spouse to rollover the amounts, when the estate is the beneficiary, as was the case in the PLR you referenced. The regulatory issue is whether a nondesignted beneficiary can rollover assets from an inherited 401(k) to an inherited IRA. The answer is no. Only a designated beneficiary is permitted to perform such a rollover. The question then becomes ' who is a designated beneficiary'? Only a person or a qualified trust is a designated beneficiary. A nonperson, such as an estate , is a nondesignated beneficiary and is therefore not permitted to rollover amounts inherited under a 401(k)- this applies even if the assets pass through to individuals, because, in order to be a designated beneficiary, one has to be a beneficiary at the time of the participant's death. If the decedent's account had been an IRA, the it is possible that the assets could be transferred to an inherited IRA for the beneficiary of the estate ( emphasis on transfer)- the IRS have allowed such transfers under PLRs- but, even then, they made sure to state that the beneficiary of the estate is not a 'designated beneficiary', and the IRA is therefore still treated as if it did not have a designated beneficiary for distribution purposes.

You are welcome.

Than you for the PLR @FPGuyThe challenge here is that the participant was not survived by a spouse ( I am assuming that is the case, because the document would have defaulted to a spouse, if there was one-- I think there might be an exception for marriages of 1 year and under- I would need to double check). The IRS have been consistent in permitting surviving spouses to be treated as the beneficiaries of IRAs- when the estate or a trust is the beneficiary and the spouse is the beneficiary of the estate/trust with sole control over disposition of the assets- allowing such spouses to rollover the inherited IRAs to their own IRAs. That treatment is not permitted for non-spouse beneficiaries . As such, even if a PLR was issued to allow a nonspouse to be treated as the beneficiary of the 401(k) account , that person would still not be a 'designated beneficiary' and would therefore not be permitted to rollover the inherited 401(k). The 401(k) Plan will ( should ) not permit a rollover for a nondesignated beneficiary. An IRA custodian, not knowing the source of the funds, might accept the direct rollover if it was done (albeit mistakenly)- but, that would result in an excess contribution to the inherited IRA

Only a 'designated beneficiary' can roll over assets from a qualified plan. An estate is not a designated --beneficiary. Therefore, a estate is not permitted to rollover amounts from a qualified plan. Notice 2007-7. https://www.irs.gov/pub/irs-drop/n-07-07.pdf, starting on page 5.

Do you really mean "rollover" or transfer? Because, non-spouse beneficiaries cannot rollover inherited plan assets, unless the rollover is a direct-rollover to an Inherited IRA by a designated beneficiary. Were 1099-Rs issued for these transactions?

Agree. The RMD is now an excess contribution in the IRA, and needs to be corrected under the excess contribution rules ( by tax filing due date, plus extensions- and Include net income attributable, in order to avoid the 6 percent excise tax. ),