Pension Bill/ Non-Spouse Beneficiary

[Guest Gompers]

Under the pension bill non-sposue beneficiares from a qualified plan can now "roll" to an "inheritied IRA.. This is effective for distribitons in 2007 or later. Should apply to participants who die in '06 since the distribution over the beneficiariy's life expectancy would not have to start until '07. What about the following situations:

1) Non-spouse beneficiary begins receiving distributions over his/her life from the qualified plan (assuming the plan allows this). Can they now simply transfer the amount in the Plan to an inherited IRA and keep up this distribuiton pattern.

2) Non-sposue beneficiary elects to use the 5 year rule and does not begin distributions by the end of the calendar year following the calendar year of death. I would assume they couldn't now transfer to an IRA and then start using their life expectancy.

SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENE-

FICIARIES OF CERTAIN RETIREMENT PLAN

DISTRIBUTIONS. 12

(a) IN GENERAL.— 13

(1) QUALIFIED PLANS.—Section 402© of the

Internal Revenue Code of 1986 (relating to rollovers

from exempt trusts) is amended by adding at the

end the following new paragraph:

‘‘(11) DISTRIBUTIONS TO INHERITED INDI-

VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE-

FICIARY.—

‘‘(A) IN GENERAL.—If, with respect to any

portion of a distribution from an eligible retire-

ment plan of a deceased employee, a direct

trustee-to-trustee transfer is made to an indi-

vidual retirement plan described in clause (i) or

(ii) of paragraph (8)(B) established for the pur-

poses of receiving the distribution on behalf of

an individual who is a designated beneficiary

(as defined by section 401(a)(9)(E)) of the em-

ployee and who is not the surviving spouse of

the employee—

‘‘(i) the transfer shall be treated as an

eligible rollover distribution for purposes of

this subsection,

‘‘(ii) the individual retirement plan

shall be treated as an inherited individual

retirement account or individual retirement

annuity (within the meaning of section

408(d)(3)©) for purposes of this title,

and

‘‘(iii) section 401(a)(9)(B) (other than

clause (iv) thereof) shall apply to such

plan.

‘

[Bird]

I think you're right on both counts.