Under the pension bill non-sposue beneficiares from a qualified plan can now "roll" to an "inheritied IRA.. This is effective for distribitons in 2007 or later. Should apply to participants who die in '06 since the distribution over the beneficiariy's life expectancy would not have to start until '07. What about the following situations:
1) Non-spouse beneficiary begins receiving distributions over his/her life from the qualified plan (assuming the plan allows this). Can they now simply transfer the amount in the Plan to an inherited IRA and keep up this distribuiton pattern.
2) Non-sposue beneficiary elects to use the 5 year rule and does not begin distributions by the end of the calendar year following the calendar year of death. I would assume they couldn't now transfer to an IRA and then start using their life expectancy.
SEC. 829. ALLOW ROLLOVERS BY NONSPOUSE BENE-
FICIARIES OF CERTAIN RETIREMENT PLAN
DISTRIBUTIONS. 12
(a) IN GENERAL.— 13
(1) QUALIFIED PLANS.—Section 402© of the
Internal Revenue Code of 1986 (relating to rollovers
from exempt trusts) is amended by adding at the
end the following new paragraph:
‘‘(11) DISTRIBUTIONS TO INHERITED INDI-
VIDUAL RETIREMENT PLAN OF NONSPOUSE BENE-
FICIARY.—
‘‘(A) IN GENERAL.—If, with respect to any
portion of a distribution from an eligible retire-
ment plan of a deceased employee, a direct
trustee-to-trustee transfer is made to an indi-
vidual retirement plan described in clause (i) or
(ii) of paragraph (8)(B) established for the pur-
poses of receiving the distribution on behalf of
an individual who is a designated beneficiary
(as defined by section 401(a)(9)(E)) of the em-
ployee and who is not the surviving spouse of
the employee—
‘‘(i) the transfer shall be treated as an
eligible rollover distribution for purposes of
this subsection,
‘‘(ii) the individual retirement plan
shall be treated as an inherited individual
retirement account or individual retirement
annuity (within the meaning of section
408(d)(3)©) for purposes of this title,
and
‘‘(iii) section 401(a)(9)(B) (other than
clause (iv) thereof) shall apply to such
plan.
‘