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Non Spouse Inherited 403(b)


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#1 lfferro

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Posted 03 July 2009 - 03:43 PM

My mother was the beneficiary to a 403(b) account.
She was not a spouse.

In publication 571 it appears that she can rollover these funds to an inherited IRA.

The investment manager over the 403(b) account stated to her that non spouses cannot may a direct transfer to an IRA.

Are there some additional considerations that would prevent a direct transfer to an inherited IRA?




#2 intruder

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Posted 06 July 2009 - 07:04 AM

QUOTE(lfferro @ Jul 3 2009, 04:43 PM)  

My mother was the beneficiary to a 403(b) account.
She was not a spouse.

In publication 571 it appears that she can rollover these funds to an inherited IRA.

The investment manager over the 403(b) account stated to her that non spouses cannot may a direct transfer to an IRA.

Are there some additional considerations that would prevent a direct transfer to an inherited IRA?


That information is incorrect. Under current law the non spouse beneficiary of a 403b annuity can rollover the benefits to an inherited IRA in the name of the deceased owner (not to their own IRA) if the plan permits such transfers. Beginning next year all plans will be required to allow rollovers of 403b benefits to an inherited IRA by non spouses.

Does the 403b plan allow for rollovers by non spouses at this time? You need to check with the employer or administrator, not some ignorant investment manager, to find out if rollovers are permitted by non spouses.

#3 BruceM

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Posted 09 July 2009 - 12:24 PM

I agree with Intruder. The 403(b) plan "May" allow your mother to establish an inherited IRA and roll the balance directly to it, and then begin her required minimum distributions from it. But if the plan does not allow this, then she'll likely be stuck with whatever payout rule the plan has.

Intruder..question: If the plan does not allow for transfer to an inherited IRA in 2009, but begins a life payout, do you know if the beneficiary can require the plan balance to be rolled to an inherited IRA in 2010, or will the new inherited IRA required option starting in 2010 only apply to those who become beneficiaries that year?

BruceM

#4 intruder

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Posted 09 July 2009 - 07:32 PM

QUOTE(BruceM @ Jul 9 2009, 01:24 PM)  

I agree with Intruder. The 403(b) plan "May" allow your mother to establish an inherited IRA and roll the balance directly to it, and then begin her required minimum distributions from it. But if the plan does not allow this, then she'll likely be stuck with whatever payout rule the plan has.

Intruder..question: If the plan does not allow for transfer to an inherited IRA in 2009, but begins a life payout, do you know if the beneficiary can require the plan balance to be rolled to an inherited IRA in 2010, or will the new inherited IRA required option starting in 2010 only apply to those who become beneficiaries that year?

BruceM


The rollover rules for non spouses requires that the rollover to an IRA occur not later than Dec 31 of the year following the year of death, otherwise the entire amount must be distributed in a lump sum not later than the end of the fifth after death occurs. So if the participant dies in 2009 the rollover must occur not later than December 31, 2010.