Non spouse Beneficiary

[Nassau]

I received a call from a non spouse beneficiary. The non spouse beneficiary received these assets from his deceased grandfather. Plan has adopted the non-spouse rollover provision. His grandfather passed on 9/4/2002 but these assets were not transfered into the non spouse beneficiary's name/acct unitl 10/8/2010. The non spouse beneficiary received approx 108K on 10/8/2010. Participant did take a partial distribution on 10/12/2010 of 35K.

Since the assets were not received by the non spouse beneficiary until 8 years after his death, how does this effect the fact that the non spouse beneficiary didn't set up installment withdrawals based on life expectancy or was not paid out over a 5 year period?

Can this non spouse beneficiary rollover these assets into an inherited IRA?

[Guest Sieve]

(If particiapant--grandfather--died in 2002, how did he take a distribution in 2010? I assume non-spouse beneficiary--grandson--took 2010 distribution.)

First of all, the non-spouse rollover rule applies only to designated beneficiaries. Assuming grandson met this requirement, there still can be no rollover at this time. (See Notice 2007-7, Q&A-17(b): " . . . On or after January 1 of the fifth year following the year in which the employee died, no amount payable to the beneficiary is eligible for rollover.") Five years have passed: 2003-2007.

Also, the Plan has violated IRC Section 401(a)(9), and needs to correct under VCP (& seek a waiver of the excise tax).