Rollover of PS-58 costs

[Guest Judy S]

Can the non-taxable portion of a distribution from a terminating defined benefit plan which consists solely of previously reported PS-58 costs be rolled over under the same rules that apply to distributions of after-tax employee contributions? These distributions are post EGTRRA and the insurance contracts were surrendered by the Trustee and cash values invested in the plan trust Are the rules any different if the plan is not terminating and the distribution is being paid to a terminated employee?

[Harwood]

Form 1099-R instructions seem to say no [and now refer to PS-58 as "cost of current life insurance protection"]

[R. Butler]

See 1.402©-2, Q&A4(f)

Q-4: Are there other amounts that are not eligible rollover

distributions?

A-4: Yes. The following amounts are not eligible rollover

distributions:

(a) Elective deferrals, as defined in section 402(g)(3), that,

pursuant to Sec. 1.415-6(b)(6)(iv), are returned as a result of the

application of the section 415 limitations, together with the income

allocable to these corrective distributions.

(b) Corrective distributions of excess deferrals as described in

Sec. 1.402(g)-1(e)(3), together with the income allocable to these

corrective distributions.

© Corrective distributions of excess contributions under a

qualified cash or deferred arrangement described in Sec. 1.401(k)-

1(f)(4) and excess aggregate contributions described in Sec. 1.401(m)-

1(e)(3), together with the income allocable to these distributions.

(d) Loans that are treated as deemed distributions pursuant to

section 72(p).

(e) Dividends paid on employer securities as described in section

404(k).

(f) The costs of life insurance coverage (P.S. 58 costs).

(g) Similar items designated by the Commissioner in revenue rulings,

notices, and other guidance published in the Internal Revenue Bulletin.

See Sec. 601.601(d)(2)(ii)(b) of this chapter.