Related Rollover?

[Guest BarbaraG]

Is a rollover from a deceased spouse (both participants in the same plan) considered a related rollover for the Top Heavy Test?

[ERISAnut]

Is a rollover from a deceased spouse (both participants in the same plan) considered a related rollover for the Top Heavy Test?

No, it isn't. In this instance, she has taken a distribution (which could have been rolled over to an IRA or even spent). Therefore, this rollover takes on the characteristics of the new plan; becoming divorced from the old plan.

When looking at related rollovers, you would normally think of a situation where the money is really not available for distribution to the particpant and is transferred to the other plan for housing. In such instance, the characteristics from the old plan will remain in tact.

Hope this helps.

I acknowlege that it is the same plan, but is treated as if it is rolled from another plan since she is spouse beneficiary instead of the actual participant with respect to those funds.

[Kevin C]

I'm reading the regs as saying that for top heavy testing, any rollover to a plan of the same employer is a related rollover.

1.416-1 T-32 Q. How are rollovers and plan-to-plan transfers treated in testing whether a plan is top-heavy?

A. The rules for handling rollovers and transfers depend upon whether they are unrelated (both initiated by the employee and made from a plan maintained by one employer to a plan maintained by another employer) or related (a rollover or transfer either not initiated by the employee or made to a plan maintained by the same employer). Generally, a rollover or transfer made incident to a merger or consolidation of two or more plans or the division of a single plan into two or more plans will not be treated as being initiated by the employee. The fact that the employer initiated the distribution does not mean that the rollover was not initiated by the employee. For purposes of determining whether two employers are to be treated as the same employer, all employers aggregated under section 414(b), © or (m) are treated as the same employer. In the case of unrelated rollovers and transfers, (1) the plan making the distribution or transfer is to count the distribution as a distribution under section 416(g)(3), and (2) the plan accepting the rollover or transfer is not to consider the rollover or transfer as part of the accrued benefit if such rollover or transfer was accepted after December 31, 1983, but is to consider it as part of the accrued benefit if such rollover or transfer was accepted prior to January 1, 1984. In the case of related rollovers and transfers, the plan making the distribution or transfer is not to count the distribution or transfer under section 416(g)(3) and the plan accepting the rollover or transfer counts the rollover or transfer in the present value of the accrued benefits. Rules for related rollovers and transfers do not depend on whether the rollover or transfer was accepted prior to January 1, 1984.

[BG5150]

If the money stayed in the plan, wouldn't it be considered a transfer within the plan?

And in my experience, the spouse would have a second account created in the plan that holds the beneficiary portion of the money, and it would be pulled out of the top heavy test, since beneficiary and QDRO accounts aren't counted.

[Laura Harrington]

If the money stayed in the plan, wouldn't it be considered a transfer within the plan?

And in my experience, the spouse would have a second account created in the plan that holds the beneficiary portion of the money, and it would be pulled out of the top heavy test, since beneficiary and QDRO accounts aren't counted.

The beneficiary account may need to be included in the test, depending upon when the participant died and whether or not the participant is a former key employee. See Treas. Reg. 1.416-1, T-12.

The regs do not specifically mention how to handle QDRO accounts, but it is generally presumed they should be treated the same as death beneficiary accounts.