Retroactive annuity eligible for rollover?

[Craig Schiller]

Hoping someone can help me with this.

Plan document requires person at 415 limit, and working past NRA to take their money.

Person past NRA is now being provided the monthly payments they should have received as a Retroactive Annuity. The rest is being rolled over.

The question involves eligibility for a rollover. I can see 3 ways of looking at this:

1): Since it is treated as being paid as a life annuity, my guess is it cannot be rolled over, since distributions paid over a life annuity basis are not eligible for a rollover;

2): Maybe it is considered similar to an equal installment distributions. If so, since this covers less than 10 years it should be eligible for a rollover; or

3): Maybe it is treated as a lump sum which would make it eligible for a rollover.

Does anyone know the answer to this?

Thanks,

Craig Schiller

[My 2 cents]

Please clarify/verify the following points:

a. The participant is required to commence receiving benefits as of the time when the 415 compensation limit would be exceeded as a result of application of actuarial increases for deferred commencement. Is that why the person has started receiving benefits?

b. The phrase "the monthly payments they should have received" implies that the payments were not begun on a timely basis. Is this so? If it is, then the situation would involve the need for at least voluntary self-correction.

c. To clarify - the person was paid retroactive monthly benefits from when payments should have started to the date that they did, and the participant (who is, one presumes, not currently affected by required minimum distributions) received the lump sum value of the future monthly benefits, which was rolled over.

This might be helpful for the people who are going to submit comments. If the situation was as described in my item c, I would vote for your choice #1. Treat the catch-up payment as covering a number of months' life annuity payments and don't try to roll it over. But don't take my word for it - check with a tax advisor.

[Andy the Actuary]

Here's a thread that might be helpful: http://benefitslink.com/boards/index.php?/topic/52382-question-about-retro-payments-and-rollovers/#.VGV9EMu9KK0

[Craig Schiller]

1. The 1st point is correct. The plan requires when over the 415 limit and over NRA to take distributions.

2. If not taken timely, the plan document also requires that the payments be made up on the cumulative value of the monthly payments at NRA (or if spouse does not consent, the QJSA equivalent. Since the document spells out the corrective procedure which is a "Retroactive Annuity" no VCP is needed.

3. The person was not taking minimums and is about to receive the distribution. Based on comments such as yours, and the fact that these have the character of a temporary life annuity, and payments made as a life annuity are not eligible for a rollover, we are going to advise this person that the payments are not eligible for rollover.

Thanks for your feedback.

Please clarify/verify the following points:

a. The participant is required to commence receiving benefits as of the time when the 415 compensation limit would be exceeded as a result of application of actuarial increases for deferred commencement. Is that why the person has started receiving benefits?

b. The phrase "the monthly payments they should have received" implies that the payments were not begun on a timely basis. Is this so? If it is, then the situation would involve the need for at least voluntary self-correction.

c. To clarify - the person was paid retroactive monthly benefits from when payments should have started to the date that they did, and the participant (who is, one presumes, not currently affected by required minimum distributions) received the lump sum value of the future monthly benefits, which was rolled over.

This might be helpful for the people who are going to submit comments. If the situation was as described in my item c, I would vote for your choice #1. Treat the catch-up payment as covering a number of months' life annuity payments and don't try to roll it over. But don't take my word for it - check with a tax advisor.