rollover of death benefit for nonspouse beneficiary

[alexa]

At one point in time under PPA changes, the rollover of death benefit for nonspouse beneficiary was optional for a plan sponsor to adopt.

Then IRS changed it to be mandatory.

Does anyone have a cite either way , optional or mandatory?

thanks

[Appleby]

It is still optional. The IRS assumed that new regs would change it to mandatory, because of language in proposed amendment to PPA 06. When the amendment was passed, the ‘mandatory ‘ feature was dropped. So we are back to square one.

[Peanut Butter Man]

I think the last information on this from the IRS was in the 2007 List of Interim and Discretionary Amendments, which states:

"§ 402©(11) [Discretionary]: PPA ’06 § 829(a)(1) added § 402©(11) to allow nonspouse beneficiaries to roll over distributions from a qualified plan to an individual retirement plan. Nonspouse beneficiary rollovers are an optional plan provision for 2007. See, Notice 2007-7. Pursuant to an impending technical correction, nonspouse beneficiary rollovers will be required for plan years beginning on or after January 1, 2008. See, section 9(e) of S. 1974, the Pension Protection Technical Corrections Act of 2007, as introduced in the Senate on August 2, 2007 and section 9(e) of H.R. 3361, the Pension Protection Technical Corrections Act of 2007, as introduced in the House of Representatives on August 3, 2007."

A copy of the 2007 List of Interim and Discretionary Amendments is available at http://www.irs.gov/retirement/article/0,,id=173372,00.html

Pension Protection Technical Corrections Act was passed by the Senate in December of 2007, and by the House earlier this year. I believe both the House and the Senate versions still contain the mandatory language. The date was changed in the House version for rollovers to nonspouse beneficiaries applying for plan years beginning after December 31, 2007 to rollover to nonspouse beneficiaries applying to plan years beginning after December 31, 2008.

I am not clear on whether rollovers to nonspouse beneficiaries are still mandatory for 2008. I am hoping the IRS will clarify this.