An old style Contributory DB Plan!

[richard]

Consider an old style contributory DB plan. You know, after-tax contributions that were required to get a pension benefit. But there's a twist. I have a client with this type of plan, but they changed it so that no new contributions are required and that existing employees would henceforth receive their regular plan benefit (1% of pay per years of service) PLUS their contributions and interest. Interest is being credited to the employees "contribution account" as actual investment earnings earned by the overall plan assets.

A 65-year-old retiring participant is now due a pension from the 1% per year of service formula. The lump sum value of this pension is $10,000 (lump sums are permitted in the plan). In addition, he contributed $3,000 in after-tax dollars to the plan; with $5,000 interest, this now totals $8,000.

So the participant is due $18,000.

My question is: what can be rolled over into an IRA. Clearly the $10,000 is taxable, but can be rolled over. Also, the $3,000 is not taxable, and cannot be rolled over. What about the $5,000. It would be taxable, but can it be rolled over?

HELP!

[AndyH]

All but the $3,000 can be rolled over. I can try to find a cite if nobody else knows one off hand.

Richard, I can't easily find one cite, but it's clear from any distribution textbook that the balance to the credit can be rolled over unless it meets one of 9 exceptions:

Periodic substantially equal pmts over 10+ years

401(a)(9) minimums

the portion of a distribution not taxable

distribution of excess 415 deferrals

other similar 401(k) refunds

loans treated as deemed distributions

dividends undr 404(k)

ps 58 costs

"similar items designated by the IRS".

IRS publication 575 is probably the best place other than a textbook to find this in print.