Beneficiary Rollover within 401(k)

[CAR]

Professional Corp has self-trusteed 401(k) Plan updated for GUST/EGTRRA last year. Owner and his wife were both employees and plan participants. Wife died in 2002. Owner wants to directly "rollover" his wife's plan assets into his plan account. Can this be accomplished now that the rollover rules have expanded? If so, I assume no 1099-R needs to be issued since the assets never leave the plan. If an inside rollover cannot be done, can the husband now roll his wife's plan assets to an IRA in his name, then roll it back into the plan as his rollover? Plan does allow receipt of rollovers for participants.

[mbozek]

The new tax law permits a surviving spouse to rollover a distribution of the deceased's spouse's interest to any plan in which the sur. spouse has an interest. I think the Sur. spouse needs to receive a distribution from the Q plan of the deceased's spouse's interest and then rollover the distribution back to the Q plan account in his name. This will generate a 1099-r and a rollover on the 1040 for 2003.

[Kirk Maldonado]

I sseem to recall that there was a prior message thread on this point, but I don't remember how people came out on this issue.

[david rigby]

Is this it?

http://benefitslink.com/boards/index.php?showtopic=13798

[CAR]

Thank you all so much for the replies! That last one really helped confirm that the husband can leave the assets in the plan and have them transfered to his plan account if the plan allows. He does not want to have to sell assets just to roll the wife's account balance out of the plan to an IRA and bring it back into the plan through a rollover. I do not read anything in the document that prohibits this "in-plan" rollover, but I am checking with the document author/attorney about this question.

[mbozek]

As long as you understand that the provisions of IRC 408(d)(3)(A)(1)(iii) permits a rollover of distributions if the entire amount received is paid into an eligilbe plan. This iindicates that there must be a distribution. There is no statutory authorization for a tax free transfer of accounts within the same plan although some people believe that such a transfer should be permitted as a rollover.