Rollover

<div class="Section1"><br /> <br /> <em>Editor&rsquo;s Note</em>: The SECURE Act 2.0 contained a new rule that expands the availability of charitable giving with retirement funds. Under the new law, taxpayers will be allowed to make a one-time qualified charitable distribution of up to $50,000 from an IRA to a charitable remainder annuity trust, charitable remainder unitrust or charitable gift annuity. To qualify, charitable remainder annuity trusts and charitable remainder unitrusts must be funded solely with qualified charitable distributions. Charitable gift annuities be funded exclusively by qualified charitable distributions and commence fixed payments of five percent or greater not later than one year from the date of funding. The new law also indexes the current limit for qualified charitable distributions to inflation for tax years beginning after 2022.A taxpayer age 70&frac12; or older is permitted to make a qualified charitable distribution (QCD) from a traditional IRA or Roth IRA that is not includable in the gross income of the taxpayer.<a href="#_ftn1" name="_ftnref1">¹</a> The exclusion for qualified charitable distributions generally is available for distributions from any type of IRA (including a Roth IRA described in Section 408A and a deemed IRA described in Section 408(q)) that is neither an ongoing SEP IRA described in Section 408(k) nor an ongoing SIMPLE IRA described in Section 408(p).<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> The provision permitting a qualified charitable distribution to be excluded from gross income was allowed to expire at the end of 2011, but the American Taxpayer Relief Act of 2012 (&ldquo;ATRA 2012&rdquo;) retroactively revived the provision for 2012 and extended it for the 2013 tax year. The Tax Increase Prevention Act of 2014 extended the provision retroactively for 2014, and the Protecting Americans Against Tax Hikes (PATH) Act of 2015 made the provision permanent.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> A qualified charitable distribution is any distribution:<br /> <ol><br /> <li>not exceeding $100,000 in the aggregate during the taxable year;</li><br /> <li>made directly, in a trustee-to-charity transfer (including a check from an IRA made payable to a charity and delivered by the IRA owner to the charity);<a href="#_ftn4" name="_ftnref4">⁴</a></li><br /> <li>from a traditional or Roth IRA (although distributions from ongoing SEPs and SIMPLE IRAs do not qualify);</li><br /> <li>to a public charity (but not a donor-advised fund or supporting organization);</li><br /> <li>that would otherwise qualify as a deductible charitable contribution (not including the percentage of income limits in IRC Section 170(b) ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="739">739</a>)); and</li><br /> <li>to the extent the distribution would otherwise be includable in gross income.<a href="#_ftn5" name="_ftnref5">⁵</a></li><br /> </ol><br /> No charitable income tax deduction is allowed for a qualified charitable distribution.<a href="#_ftn6" name="_ftnref6">⁶</a><br /> <br /> If a qualified charitable distribution is made from any IRA funded with nondeductible contributions, the distribution is treated as coming first from deductible contributions and earnings.<a href="#_ftn7" name="_ftnref7">⁷</a> This is contrary to the general rule that distributions from a traditional IRA with both deductible and nondeductible contributions are deemed made on a pro-rata basis.<a href="#_ftn8" name="_ftnref8">⁸</a><br /> <br /> Qualified charitable distributions count toward a taxpayer&rsquo;s required minimum distributions ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3682">3682</a>).<a href="#_ftn9" name="_ftnref9">⁹</a><br /> <br /> The prohibition on making a qualified charitable distribution from a SEP IRA or a SIMPLE IRA only applies to &ldquo;ongoing&rdquo; SEP IRAs or SIMPLE IRAs. These kinds of IRAs are ongoing if a contribution is made for the taxable year of the charitable distribution.<a href="#_ftn10" name="_ftnref10">¹⁰</a><br /> <br /> Post-SECURE Act, taxpayers who make both post-70&frac12; (deductible) IRA contributions and take qualified charitable distributions (QCDs) are also subject to an anti-abuse rule. Future QCDs are reduced by the total amount of deductible post-70&frac12; IRA contributions that have not offset another QCD, although the amount cannot be reduced below zero.<a href="#_ftn11" name="_ftnref11">¹¹</a> Amounts that cannot be treated as a pre-tax QCD can be treated as an itemized deduction for the taxpayer.<br /> <p style="padding-left: 40px;"><em>Example:</em> An individual who turned age 70&frac12; before 2020 deducts $5,000 for contributions for each of 2020 and 2021 but makes no contribution for 2022. The individual makes no QCDs for 2020 and makes QCDs of $6,000 for 2021 and $6,500 for 2022.</p><br /> <p style="padding-left: 40px;">The excludable amount of QCDs for 2021 is the $6,000 of QCDs reduced by the $10,000 aggregate amount of post-age 70&frac12; contributions for 2021 and earlier taxable years. For this individual, these amounts are $5,000 for each of 2020 and 2021, resulting in no excludable QCDs for 2021 (that is, $6,000 &ndash; $10,000 = ($4,000)).</p><br /> <p style="padding-left: 40px;">The excludable amount of the QCDs for 2022 is the $6,500 of QCDs reduced by the portion of the $10,000 aggregate amount of post-age 70&frac12; contributions deducted that did not reduce the excludable portion of the QCDs for earlier taxable years. Thus, $6,000 of the aggregate amount of post-age 70&frac12; contributions deducted does not apply for 2022 because that amount has reduced the excludable amount of QCDs for 2021. The remaining $4,000 of the aggregate amount of post-age 70&frac12; contributions deducted reduces the excludable amount of any QCDs for subsequent taxable years. Accordingly, the excludable amount of the QCDs for 2022 is $2,500 ($6,500 &ndash; $4,000 = $2,500). As described above, because the $4,000 amount reduced the excludable amount of QCDs for 2022, that $4,000 amount does not apply again in later years, and no amount of post-age 70&frac12; contributions remains to reduce the excludable amount of QCDs for later taxable years.<a href="#_ftn12" name="_ftnref12">¹²</a></p><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect; 408(d)(8), as amended.<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; Notice 2007-7, 2007-1 C.B. 395, A-36.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; The American Taxpayer Relief Act of 2012, Pub. Law No. 112-240.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Notice 2007-7, 2007-1 CB 395.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; IRC &sect; 408(d)(8).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; IRC &sect; 408(d)(8)(E).<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; IRC &sect; 408(d)(8)(D).<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp; IRC &sect;&sect; 72, 408(d)(1).<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp; IRC &sect; 408(d)(8), as amended.<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp; Notice 2007-7, 2007-1 CB 395.<br /> <br /> <a href="#_ftnref11" name="_ftn11">11</a>.&nbsp; IRC &sect; 408(d)(8)(A).<br /> <br /> <a href="#_ftnref12" name="_ftn12">12</a>.&nbsp; Notice 2020-68.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> If any portion of the balance to the credit of an employee in a qualified retirement plan is paid in an eligible rollover distribution and the distributee transfers any portion of the property received to an eligible retirement plan ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3995">3995</a>), then the amount of the distribution so transferred generally will not be includable in income.<a href="#_ftn1" name="_ftnref1">¹</a> Unless otherwise indicated, the rules that apply to qualified plans are incorporated by reference into the requirements for eligible Section 457 governmental plans.<br /> <br /> An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the employee in a qualified trust, except that the term does not include:<br /> <p style="padding-left: 40px;">(1)&nbsp; any distribution that is part of a series of substantially equal payments, at least annually, made over the life or life expectancy of the employee or the joint lives or life expectancies of the employee and his or her designated beneficiary,</p><br /> <p style="padding-left: 40px;">(2)&nbsp; any distribution made for a specified period of ten years or more,</p><br /> <p style="padding-left: 40px;">(3)&nbsp; any distribution that is a required minimum distribution under IRC Section 401(a)(9), and</p><br /> <p style="padding-left: 40px;">(4)&nbsp; any hardship distribution.<a href="#_ftn2" name="_ftnref2">²</a></p><br /> Regulations specify other items that are not considered eligible rollover distributions, including any portion of a distribution excludable from gross income other than net unrealized appreciation (although this has been modified by subsequent legislation), the Table 2001 or P.S. 58 cost of life insurance ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3948">3948</a>), corrective distributions of excess contributions and excess aggregate contributions ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3808">3808</a>), excess deferrals ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3760">3760</a>), and dividends paid on employer securities under IRC Section 404(k) ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3824">3824</a>).<a href="#_ftn3" name="_ftnref3">³</a> Treasury Regulations Sections 1.402(c)-2, A-9, and 1.401(a)(31)-1 provide guidance on the treatment of plan loans for purposes of the rollover and withholding rules.<br /> <br /> If a qualified retirement plan distributes an annuity contract to a participant, amounts paid under that contract are considered to be payments of the balance to the participant&rsquo;s credit and may be treated as eligible rollover distributions to the extent they would otherwise qualify. Therefore, a participant may surrender the annuity contract and treat the sum received as an eligible rollover distribution to the extent that it is includable in income and is not a required distribution under IRC Section 401(a)(9).<a href="#_ftn4" name="_ftnref4">⁴</a> The IRS determined that a separate lump sum settlement payment to the widow of a plan participant who already was receiving monthly payments under the plan was eligible for rollover treatment under IRC Section 402(c)(4).<a href="#_ftn5" name="_ftnref5">⁵</a><br /> <br /> A distribution of property other than money is treated the same. The amount transferred equals the property distributed.<a href="#_ftn6" name="_ftnref6">⁶</a> A taxpayer may not retain property received in a distribution and simply rollover a cash amount representing the fair market value of the property.<a href="#_ftn7" name="_ftnref7">⁷</a> Conversely, a taxpayer may not take cash received in a distribution, convert it into stock or any other type of investment, and then contribute the converted cash investment into an IRA as a rollover.<a href="#_ftn8" name="_ftnref8">⁸</a> This rule applies to IRA and qualified retirement plan rollovers, including rollovers into Roth IRAs.<br /> <br /> Where a distribution includes property and exceeds the rollover contribution, the participant, following a sale, may irrevocably designate the portion of the money received, and the portion of the proceeds of the sale, that are to be treated as included in the rollover and the portions that are to be deemed attributable to nondeductible employee contributions, if any. If the taxpayer fails to make a designation, allocations will be made on a ratable basis.<a href="#_ftn9" name="_ftnref9">⁹</a> Under the basis recovery rules of IRC Section 72(e), nondeductible employee contributions are recovered first from amounts not rolled over.<a href="#_ftn10" name="_ftnref10">¹⁰</a><br /> <br /> The IRS determined that a mistaken transfer by a broker of an otherwise eligible rollover distribution from a qualified plan into a brokerage account and then into an IRA failed to qualify as an eligible rollover and was includable in the taxpayer&rsquo;s gross income.<a href="#_ftn11" name="_ftnref11">¹¹</a> Taxpayers who were defrauded by their investment advisor of IRA distributions intended to be rollovers were not permitted to replace the stolen assets from other funds and treat the replacement assets as rollover contributions.<a href="#_ftn12" name="_ftnref12">¹²</a><br /> <br /> The maximum amount that may be rolled over generally is the amount that would be includable in income if not rolled over.<a href="#_ftn13" name="_ftnref13">¹³</a> After-tax contributions can be rolled over from a qualified plan to a traditional IRA or transferred in a direct trustee-to-trustee transfer to a defined contribution plan provided the plan separately accounts for after-tax contributions. After-tax contributions, including nondeductible contributions to a traditional IRA, may not be rolled over from a traditional IRA into a qualified plan, Section 403(b) tax sheltered annuity, or eligible Section 457 governmental plan.<a href="#_ftn14" name="_ftnref14">¹⁴</a> Rollover amounts will be treated as first consisting of taxable amounts.<a href="#_ftn15" name="_ftnref15">¹⁵</a><br /> <br /> Unless a rollover is carried out by means of a direct rollover, a rollover generally must be completed within 60 days after receipt of the distribution ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4016">4016</a>).<a href="#_ftn16" name="_ftnref16">¹⁶</a> The IRS has the authority to waive the 60-day requirement where failure to waive it would be against equity or good conscience, including casualty, disaster, or other events beyond the reasonable control of the individual subject to the requirement.<a href="#_ftn17" name="_ftnref17">¹⁷</a> The IRS has provided guidance on the requirements for a hardship waiver of the 60-day requirement.<a href="#_ftn18" name="_ftnref18">¹⁸</a> <em>See</em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4017">4017</a> for a discussion of the new self-certification process that may allow a taxpayer to obtain a waiver of the 60-day time limit.<br /> <br /> Unless a rollover is carried out by means of a direct rollover, the distribution amount will be subject to a mandatory income tax withholding rate of 20 percent ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4001">4001</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4004">4004</a>).<a href="#_ftn19" name="_ftnref19">¹⁹</a><br /> <br /> Rollover contributions may be divided among several traditional IRAs.<a href="#_ftn20" name="_ftnref20">²⁰</a> These may be either existing plans or plans newly created to receive the rollover ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4008">4008</a>). A traditional IRA inherited from someone who died after 1983, other than a deceased spouse, generally is ineligible to receive a rollover. If an individual retirement annuity is used, it may not be an endowment contract. Although property may normally be rolled over, a rollover to a traditional individual retirement account may not include a retirement income, endowment, or other life insurance contract because IRC Section 408(a)(3) prohibits investment of individual retirement account funds in life insurance contracts.<a href="#_ftn21" name="_ftnref21">²¹</a> A rollover may be made from a qualified plan even though the participant is an active participant in another plan.<br /> <br /> <em>See</em> Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3999">3999</a> for the new rules that allow a taxpayer to roll pre-tax and after-tax contributions into separate accounts in a single distribution.<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect; 402(c)(1).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; IRC &sect;&sect; 402(c)(4), 457(e)(16).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect;&sect; 1.402(c)-2, A-3, 1.402(c)-2, A-4.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect; 1.402(c)-2, A-10; Let. Rul. 9338041.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; Let. Rul. 9718037.<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; IRC &sect; 402(c)(1)(C).<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; Rev. Rul. 87-77, 1987-2 CB 115.<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp; Lemishow v. Comm., 110 TC 110 (1998).<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp; IRC &sect;&sect; 402(c)(6), 457(e)(16)(B).<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp; Notice 87-13, 1987-1 CB 432, A-18; Let. Rul. 9043056.<br /> <br /> <a href="#_ftnref11" name="_ftn11">11</a>.&nbsp; Let. Rul. 9847031.<br /> <br /> <a href="#_ftnref12" name="_ftn12">12</a>.&nbsp; FSA 199933038.<br /> <br /> <a href="#_ftnref13" name="_ftn13">13</a>.&nbsp; IRC &sect;&sect; 402(c)(2), 457(e)(16)(B).<br /> <br /> <a href="#_ftnref14" name="_ftn14">14</a>.&nbsp; IRC &sect;&sect; 402(c)(2), 457(e)(16)(B).<br /> <br /> <a href="#_ftnref15" name="_ftn15">15</a>.&nbsp; IRC &sect; 402(c)(2).<br /> <br /> <a href="#_ftnref16" name="_ftn16">16</a>.&nbsp; IRC &sect; 402(c)(3)(A), 457(e)(16)(B).<br /> <br /> <a href="#_ftnref17" name="_ftn17">17</a>.&nbsp; IRC &sect; 402(c)(3)(B).<br /> <br /> <a href="#_ftnref18" name="_ftn18">18</a>.&nbsp; Rev. Proc. 2003-16, 2003-1 CB 359.<br /> <br /> <a href="#_ftnref19" name="_ftn19">19</a>.&nbsp; IRC &sect; 3405(c)(1).<br /> <br /> <a href="#_ftnref20" name="_ftn20">20</a>.&nbsp; Rev. Rul. 79-265, 1979-2 CB 186; Let. Rul. 9331055.<br /> <br /> <a href="#_ftnref21" name="_ftn21">21</a>.&nbsp; Rev. Rul. 81-275, 1981-2 CB 92.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> An owner of a traditional IRA (other than a SIMPLE IRA during the first two years of participation ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3709">3709</a>)) may receive a distribution of any amount from it and within 60 days roll that amount, or any part of that amount, over into any other traditional IRA (i.e., a receiving plan).<a href="#_ftn1" name="_ftnref1">¹</a> Likewise, an owner of a Roth IRA may receive such a distribution from it and within 60 days roll that amount, or any part of that amount, over into any other Roth IRA.<a href="#_ftn2" name="_ftnref2">²</a> Under previous rules, the only rollover permitted to a SIMPLE IRA was from another SIMPLE IRA. However, the Protecting Americans from Tax Hikes Act of 2015 (PATH) modified these rules to permit a taxpayer to roll over funds from an employer-sponsored retirement plan (such as a 401(k)) to a SIMPLE IRA as long as the taxpayer has participated in the SIMPLE IRA plan for at least two years.<a href="#_ftn3" name="_ftnref3">³</a> A Roth IRA generally can be rolled over only to another Roth IRA.<br /> <br /> The IRS is authorized to waive the 60-day rollover requirement where failure to waive it would be against equity or good conscience, including upon the occurrence of a casualty, disaster, or other event beyond the reasonable control of the individual subject to the requirement ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4016">4016</a>).<a href="#_ftn4" name="_ftnref4">⁴</a><br /> <br /> The owner, for purposes of these rules, includes a spouse who has made a rollover ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4014">4014</a>). The receiving plan may be an existing plan or one newly created, but an endowment contract or an individual retirement plan inherited from a decedent who died after 1983, other than a deceased spouse, may not be used as a receiving individual retirement plan.<br /> <br /> The distributing plan or any other eligible retirement plan ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4000">4000</a>) may receive any or all of the distribution as a rollover amount.<a href="#_ftn5" name="_ftnref5">⁵</a> Mixing of funds from different sources in a single traditional IRA will not prevent further rollover to another eligible retirement plan, but it will prevent the owner from preserving any capital gains or special averaging treatment ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3971">3971</a>) available on a plan distribution.<a href="#_ftn6" name="_ftnref6">⁶</a><br /> <br /> When executing an IRA-to-IRA rollover, the taxpayer must contribute the same property they received from the original IRA to the receiving IRA (they cannot sell assets and roll over the cash proceeds, for example).&nbsp; The same property rollover rule applies to both IRA-to-IRA rollovers and Roth IRA-to-Roth IRA rollovers.&nbsp; When the same property rollover rule is violated, the amount distributed is treated as a cash distribution that&rsquo;s taxed as ordinary income (and subject to the additional 10% early withdrawal penalty for taxpayers under age 59 1/2).&nbsp; The rule does not apply to rollovers from company-sponsored qualified plans to IRAs.&nbsp; If the original distribution comes from a qualified plan, the taxpayer has the option of either (1) selling the distributed property and contributing the cash proceeds or (2) rolling the same property that was received into the IRA.&nbsp; Unlike the 60-day rule, the IRS does not have authority to waive violations of the same property rule.<br /> <br /> Only one rollover from a traditional IRA to any other traditional IRA or from a particular Roth IRA to any other Roth IRA may be made in any one-year period.<a href="#_ftn7" name="_ftnref7">⁷</a> Trustee-to-trustee transfers are not considered rollovers for this purpose.<br /> <br /> Until recently, the IRS applied this limitation separately to each IRA.<a href="#_ftn8" name="_ftnref8">⁸</a> However, the Tax Court disagreed with the IRS&rsquo; interpretation of the rule and found that each taxpayer is limited to one nontaxable IRA rollover contribution per one-year period, even though the taxpayer may own multiple IRAs and take only a single distribution from each IRA. The Tax Court examined the wording of IRC Section 408(d)(3)(B) and found that the prohibition against multiple nontaxable rollover transactions in a single year was not specific to any particular IRA held by a taxpayer, but instead applied to all IRAs maintained by a taxpayer.<a href="#_ftn9" name="_ftnref9">⁹</a><br /> <br /> The IRS has since indicated that it will follow the Tax Court&rsquo;s decision in this case.<a href="#_ftn10" name="_ftnref10">¹⁰</a> Therefore, the limitation will now be imposed on an aggregate basis, rather than on an IRA-by-IRA basis.<br /> <br /> The one year lookback limitation of IRC Section 408(d)(3)(B) applies only to distributions from an individual retirement plan; a rollover from a qualified plan to an IRA is not counted.<a href="#_ftn11" name="_ftnref11">¹¹</a> Also, a rollover from a traditional IRA to a Roth IRA does not count towards this limit.<a href="#_ftn12" name="_ftnref12">¹²</a><br /> <br /> Payment of an arbitration award, designed to replace wasted IRA assets, into a new individual retirement account was a valid rollover.<a href="#_ftn13" name="_ftnref13">¹³</a> Likewise, a court-ordered payment of the diminished value of an IRA resulting from the investment company&rsquo;s error was eligible for rollover treatment.<a href="#_ftn14" name="_ftnref14">¹⁴</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect; 408(d)(3).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; IRC &sect;&sect; 408(d)(3), 408A(a), 408A(e).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; IRC &sect; 408(p)(1)(B).<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; IRC &sect; 402(c)(3)(B); Rev. Proc. 2003-16, 2003-1 CB 359.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; IRC &sect; 402(c)(8)(B).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; EGTRRA 2001, &sect;&sect; 641(f)(3), 642(c)(2).<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; IRC &sect;&sect; 408(d)(3)(B), 408A(a).<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp; IRS Pub. 590 (2013).<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp; Bobrow v. Commissioner, TC Memo 2014-21.<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp; Ann. 2014-15, 2014-16 IRB 1.<br /> <br /> <a href="#_ftnref11" name="_ftn11">11</a>.&nbsp; Let. Rul. 8745054.<br /> <br /> <a href="#_ftnref12" name="_ftn12">12</a>.&nbsp; IRC &sect; 408A(e).<br /> <br /> <a href="#_ftnref13" name="_ftn13">13</a>.&nbsp; Let. Rul. 8739034.<br /> <br /> <a href="#_ftnref14" name="_ftn14">14</a>.&nbsp; Let. Rul. 8814063.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> Yes.<br /> <br /> Where any portion of an eligible distribution from a qualified plan is paid to the spouse of a participant after that participant&rsquo;s death, the spouse may make a rollover contribution of all or any part of that portion within 60 days of receipt.<a href="#_ftn1" name="_ftnref1">¹</a> The IRS is authorized to waive the 60-day rule under certain circumstances ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4016">4016</a>).<br /> <br /> A qualified plan, a traditional IRA, a Roth IRA ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3662">3662</a>), a tax sheltered annuity, or an eligible Section 457 governmental plan that agrees to separately account for funds received from any eligible retirement plan except another eligible Section 457 governmental plan is treated as an eligible retirement plan with respect to a surviving spouse.<a href="#_ftn2" name="_ftnref2">²</a> In other words, a surviving spouse may roll over an eligible distribution into his or her own plan account, provided the plan accepts rollover contributions.<a href="#_ftn3" name="_ftnref3">³</a><br /> <br /> The other rules applicable to rollovers in general apply to rollovers by a deceased participant&rsquo;s spouse ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4000">4000</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4001">4001</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4004">4004</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4007">4007</a>, Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4016">4016</a>).<a href="#_ftn4" name="_ftnref4">⁴</a> Thus, unless a spouse elects the direct rollover option, the distribution will be subject to mandatory withholding at 20 percent ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4004">4004</a>).<br /> <br /> Because the surviving spouse of an owner of a traditional IRA is not subject to the inherited account rules, the surviving spouse may make rollovers to and from the plan.<a href="#_ftn5" name="_ftnref5">⁵</a> This generally has held true whether the spouse was the beneficiary designated under the plan or inherited the account as sole beneficiary of the owner&rsquo;s estate.<a href="#_ftn6" name="_ftnref6">⁶</a> Under regulations proposed in 2022, spousal beneficiaries will also be required to elect to treat the deceased spouse&rsquo;s IRA as their own by the later of (1) December 31 of the year following the year of the owner&rsquo;s death or<br /> (2) the individual&rsquo;s required beginning date (73 in 2023-2032, 72 in 2020-2022).<br /> <br /> Furthermore, a proper rollover was considered made by a surviving spouse who, as her deceased husband&rsquo;s executrix, transferred the right to receive the benefits due her husband from his profit sharing plan to herself under the residuary bequest in the husband&rsquo;s will and then transferred this amount into an IRA already established on her behalf.<a href="#_ftn7" name="_ftnref7">⁷</a><br /> <br /> In a number of private rulings during the 1990s, the IRS stated that if a decedent&rsquo;s IRA or tax sheltered annuity passed through a third party, such as a trust, and then was distributed to the decedent&rsquo;s surviving spouse, the spouse was treated as acquiring the IRA or tax sheltered annuity from the trust rather than from the decedent; thus, no rollover was possible.<a href="#_ftn8" name="_ftnref8">⁸</a><br /> <br /> The IRS also determined on several occasions that if the trustee had no discretion as to the allocation of IRA proceeds to a trust or the payment of the proceeds directly to the surviving spouse, the surviving spouse would be treated as having acquired the IRA proceeds from the decedent rather than from the trust. In other words, a rollover was possible.<a href="#_ftn9" name="_ftnref9">⁹</a><br /> <br /> In numerous rulings, the IRS has treated a surviving spouse as having acquired the IRA from the decedent and not the trust where the surviving spouse had the power to revoke the trust.<a href="#_ftn10" name="_ftnref10">¹⁰</a><br /> <br /> The preamble to the 2002 final regulations under IRC Section 401(a)(9) ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3892">3892</a>) clarifies that if a surviving spouse receives a distribution from a deceased spouse&rsquo;s IRA, the spouse is permitted to roll that distribution over within 60 days into an IRA in the spouse&rsquo;s own name to the extent that the distribution is not a required distribution, regardless of whether or not the spouse is the sole beneficiary of the IRA owner.<a href="#_ftn11" name="_ftnref11">¹¹</a> In other words, it appears that for rollover purposes, the final regulations were intended to put to rest the distinction between trusts that provide discretion to the surviving spouse and those that do not.<br /> <br /> The surviving spouse does not receive a stepped up basis with respect to the decedent&rsquo;s plan interest or tax sheltered annuity, as retirement benefits are treated as income in respect of a decedent.<a href="#_ftn12" name="_ftnref12">¹²</a><br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect; 402(c)(9).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; IRC &sect;&sect; 402(c)(9), 402(c)(10).<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect; 1.402(c)-2, A-11.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; IRC &sect;&sect; 402(c)(9), 403(a)(4), 403(b)(8).<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; IRC &sect; 408(d)(3)(C).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; <em>See, e.g.,</em> Let. Ruls. 9820010, 9502042, 9402023, 8925048.<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; Let. Rul. 9351041.<br /> <br /> <a href="#_ftnref8" name="_ftn8">8</a>.&nbsp; <em>See, e.g</em>., Let. Ruls. 9515041, 9427035, 9416045.<br /> <br /> <a href="#_ftnref9" name="_ftn9">9</a>.&nbsp; <em>See, e.g.,</em> Let. Ruls. 200324059, 9813018, 9649045, 9533042, 9445029, 201430026, 201430029.<br /> <br /> <a href="#_ftnref10" name="_ftn10">10</a>.&nbsp; Let. Ruls. 199910067, 9815050, 9721028, 9427035.<br /> <br /> <a href="#_ftnref11" name="_ftn11">11</a>.&nbsp; TD 8987, 67 Fed. Reg. 18988 (4-17-02).<br /> <br /> <a href="#_ftnref12" name="_ftn12">12</a>.&nbsp; IRC &sect; 691; Treas. Reg. &sect;1.691(a)-1.<br /> <br /> </div></div><br />

<div class="Section1"><br /> <br /> Yes.<br /> <br /> A qualified plan, a Section 403(b) tax sheltered annuity, and an eligible Section 457 governmental plan must provide a participant receiving an eligible rollover distribution the option to have the distribution transferred in the form of a direct rollover to another eligible retirement plan.<a href="#_ftn1" name="_ftnref1">¹</a> This direct rollover option generally must be provided to any participant receiving a distribution.<a href="#_ftn2" name="_ftnref2">²</a><br /> <br /> A direct rollover is defined as an eligible rollover distribution ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3998">3998</a>) that is paid directly to an eligible retirement plan ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4000">4000</a>) for the benefit of the distributee. A direct rollover may be accomplished by any reasonable means of direct payment, including the use of a wire transfer or a check that is negotiable only by the trustee of the eligible retirement plan.<a href="#_ftn3" name="_ftnref3">³</a> Giving the check to the distributee for delivery to the eligible retirement plan is considered reasonable provided that the check is made payable to the trustee of the eligible retirement plan for the benefit of the distributee.<a href="#_ftn4" name="_ftnref4">⁴</a> Certain amounts may be rolled over only in the form of a trustee-to-trustee transfer.<a href="#_ftn5" name="_ftnref5">⁵</a> Plans are not required to accept rollovers, direct or otherwise.<br /> <br /> If a participant&rsquo;s total distribution is expected to be less than $200, the participant need not be offered the option of a direct rollover. While a participant must be permitted to elect a direct rollover of only a portion of the distribution, a plan administrator may require that this direct rollover portion equal at least $500. In the case of Section 403(b) tax sheltered annuities, the payor of the eligible rollover distribution is treated as the plan administrator.<br /> <br /> A plan administrator is not required to permit a participant to make a direct rollover of only a portion of the distribution if the full amount of the distribution totals less than $500. A plan administrator may permit a participant to divide his or her distribution into separate distributions to be paid to two or more eligible retirement plans in direct rollovers but is not required to do so.<a href="#_ftn6" name="_ftnref6">⁶</a><br /> <br /> If an eligible rollover distribution from a qualified retirement plan, tax sheltered annuity, or eligible governmental 457 plan is not handled by means of a direct rollover, the distribution will be subject to a mandatory income tax withholding rate of 20 percent ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="4004">4004</a>).<a href="#_ftn7" name="_ftnref7">⁷</a><br /> <p style="text-align: center;"><strong>Automatic Rollovers</strong></p><br /> Plans subject to the direct rollover rules are required to provide that a cash-out distribution ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="3869">3869</a>) in excess of $1,000 and less than $7,000 ($5,000 prior to 2024) will automatically be transferred to an individual retirement plan unless the distributee affirmatively elects to have it transferred to another eligible retirement plan or elects to receive it directly.<br /> <br /> <div class="refs"><br /> <br /> <hr align="left" size="1" width="33%"><br /> <br /> <a href="#_ftnref1" name="_ftn1">1</a>.&nbsp; IRC &sect;&sect; 401(a)(31), 403(b)(10), 457(d)(1)(C).<br /> <br /> <a href="#_ftnref2" name="_ftn2">2</a>.&nbsp; Treas. Reg. &sect; 1.402(c)-2, A-1.<br /> <br /> <a href="#_ftnref3" name="_ftn3">3</a>.&nbsp; Treas. Reg. &sect; 1.401(a)(31)-1, A-3.<br /> <br /> <a href="#_ftnref4" name="_ftn4">4</a>.&nbsp; Treas. Reg. &sect; 1.401(a)(31)-1, A-4.<br /> <br /> <a href="#_ftnref5" name="_ftn5">5</a>.&nbsp; IRC &sect; 402(c)(2).<br /> <br /> <a href="#_ftnref6" name="_ftn6">6</a>.&nbsp; Treas. Reg. &sect; 1.401(a)(31)-1, A-2, A-9 to A-11.<br /> <br /> <a href="#_ftnref7" name="_ftn7">7</a>.&nbsp; IRC &sect; 3405(c)(1).<br /> <br /> </div></div><br />