Spousal Rollover of death benefit into same plan

[Craig Garner]

Participant is 75, but is no longer working and is taking RMD's. Spouse is 65, and is still working. Both are participants in the same 401k plan. Participant dies, spouse is the sole beneficiary. Neither is an owner.

I know if the spouse were to rollover his account into an IRA (spousal rollover) and treat it as her own IRA, she could stop the RMD's until she turns 70 1/2.

After 2001, a spouse could also rollover benefits into an eligible retirement plan (and, presumably, also treat his account as her own and stop RMDs).

Since she is in the same plan as her deceased spouse, can she elect a "rollover" of his account into her existing account, treat it as her own and STOP RMDs until she turns age 70 1/2 (or retires)?

[mbozek]

Why not? When participant dies spouse become owner of participants interest. Spouse can roll over decedents account balance to her own account in the plan if rollovers to her account are permitted. Spouse would only be required to take RMD for year of participants death if not already taken.

[ForksnKnives]

I agree it can be done but the spousal beneficiary should make sure an actual rollover occurs into her participant account and the money is not left lying in a beneficiary account in her name.

[KBauer]

I understand this is an older post, but how would this event be recorded on Form 5500 if the rollover never left the plan?

[mbozek]

I would treat it as a distribution form the plan to a surviving spouse and a participant rollover into the plan.

[ESOP Guy]

In fact to just to leave an audit trail I would strong think about having the wife complete distribution forms. So the paperwork is in place to show she really had a choice to take the money and keep it, put in IRA or roll over to another qualified plan. My guess I wouldn't do a 1099-R but I think you could make a case one should be done. After all what is happening legally is she is taking her benefit as a beneficiary from the plan and then rolling it into the plan. I also wouldn't write a check to the plan only to have the check cashed by the plan either.

Like I said I would most likely do the forms showing a paper trail the money was distributed and rolled. Mostly as a paper trail for an auditor.

[GMK]

I agree that the paper trail is needed, but not just as a CYA for when the auditor shows up.

I don't see how the plan can move the benefit without the beneficiary's authorization and elections. Spouse beneficiaries in particular have numerous options for what they can do with their beneficiary benefit, and the Plan needs written, not verbal, instructions. As noted above, treat it like any other distribution.

And I'd issue the 1099-R for the rollover. (Distributions of beneficiary benefits are not exempt from 1099 reporting, are they?) I agree that writing a check from the plan to the plan is not necessary. Book entry suffices for that.

[DP]

I'm opening up this topic again. What if the spouse is not a participant in this plan, but she wants to keep her deceased spouse's assets in this plan? Is there a problem with that? Would the account be retitled in her name so she can use her RBD? The deceased participant is 90 and the spouse is 88.

[chc93]

I don't think this is possible. The spouse is not a participant in the plan, so cannot have an account in the plan.

[GMK]

The spouse can do a rollover to the spouse's own IRA, but if the benefit stays in the Plan, it stays in the name of the Participant FBO the spouse The spouse would then take RMD's from the account. For the year the Participant died, the RMD is based on the Participant's age. If the Participant already took an RMD for the year in which the Participant died, then no additional RMD is required for that year. For the following years, the RMD is based on the beneficiary's age each year.

edit: or the spouse could choose the 5-year rule for the distribution.

[DP]

Thank you, GMK.