242(b) elections

[Guest arlene]

A husband and wife are both participants in a qualified plan and both timely signed 242(b) elections. The husband dies. Can the wife rollover her deceased spouse's distribution into her account under the Plan and defer receipt of benefits pursuant to the 242(b) election?

[Mike Preston]

I would think not. However, the terms of the 242(b) under the light of the existing plan control what can or should be done. I would be very surprised if the 242(b) election mentioned augmentation of the plan's benefits pursuant to rollovers of any kind, whether spousal or personal.

[KJohnson]

From the regs:

Q-15. If an amount is distributed by one plan (distributing plan)

and rolled over into another plan (receiving plan), may the receiving

plan distribute the amount rolled over in accordance with a section

242(b)(2) election made under either the distributing plan or the

receiving plan?

A-15. No, if an amount is distributed by one plan (distributing

plan) and rolled over into another plan (receiving plan), the receiving

plan must distribute the amount rolled over in accordance with section

401(a)(9) whether or not the employee made a section 242(b)(2) election

under the distributing plan. Further, if the amount rolled over was not

distributed in accordance with the election, the election under the

distributing plan is revoked and section 401(a)(9) will apply to all

subsequent distributions by the distributing plan. Finally, if the

employee made a section 242(b)(2) election under the receiving plan and

such election is still in effect, the amount rolled over must be

separately accounted for under the receiving plan and distributed in

accordance with section 401(a)(9). If amounts rolled over are not

separately accounted for, any section 242(b)(2) election under the

receiving plan is revoked and section 401(a)(9) will apply to subsequent

distributions by the receiving plan.