A little over a year ago, I started this blog to keep track of my notes about the Pension Protection Act. One of my first posts was about rollovers to nonspouse beneficiaries. One year and 126,210 visitors later, rollovers to nonspouse beneficiaries remain a hot topic.
Last week, the House of Representatives finally passed H.R. 3361, the Pension Protection Technical Corrections Act of 2008 (PPTCA). Since the Senate passed their version of the PPTCA, S. 1974, late last year, the Senate should make quick work of reconciling the differences between their bill and H.R. 3361, and have a version of PPTCA ready for the President to sign as early as mid-April.
For rollovers to nonspouse beneficiaries, the passage of H.R. 3361 has significant impact because of the IRS’ position on rollovers to nonspouse beneficiaries. In the 2007 List of Interim and Discretionary Amendments, the IRS included this statement:
§ 402(c)(11) [Discretionary]: PPA ’06 § 829(a)(1) added § 402(c)(11) to allow nonspouse beneficiaries to roll over distributions from a qualified plan to an individual retirement plan. Nonspouse beneficiary rollovers are an optional plan provision for 2007. See, Notice 2007-7. Pursuant to an impending technical correction, nonspouse beneficiary rollovers will be required for plan years beginning on or after January 1, 2008. See, section 9(e) of S. 1974, the Pension Protection Technical Corrections Act of 2007, as introduced in the Senate on August 2, 2007 and section 9(e) of H.R. 3361, the Pension Protection Technical Corrections Act of 2007, as introduced in the House of Representatives on August 3, 2007.
The version of PPTCA that this paragraph of the 2007 List of Interim and Discretionary Amendments referenced was the Introduced version in the House. Section 9(e) of that version of H.R. 3361 stated:
(e) Amendments Related to Section 829-
(1) Section 402(c)(11) of the 1986 Code is amended–
(A) by inserting `described in paragraph (8)(B)(iii)’ after `eligible retirement plan’ in subparagraph (A), and
(B) by striking `trust’ before `designated beneficiary’ in subparagraph (B).
(2)(A) Section 401(a)(31)(D) of the 1986 Code is amended by adding at the end the following new sentence: `Such term shall include any distribution which is treated as an eligible rollover distribution by reason of section 402(c)(11), 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B).’
(B) The amendment made by subparagraph (A) shall apply with respect to plan years beginning after December 31, 2007.
In the Engrossed version of PPTCA, which passed the House last week, the applicability date changed from December 31, 2007, to December 31, 2008. Section 9(f) of H.R. 3361 now states:
(f) AMENDMENTS RELATED TO SECTION 829.—
(1) Section 402(c)(11) of the 1986 Code is amended—
- (A) by inserting ‘‘described in paragraph (8)(B)(iii)’’ after ‘‘eligible retirement plan’’ in subparagraph (A), and
(B) by striking ‘‘trust’’ before ‘‘designated beneficiary’’ in subparagraph (B).
(2)(A) Section 402(f)(2)(A) of the 1986 Code is amended by adding at the end the following new sentence: ‘‘Such term shall include any distribution to a designated beneficiary which would be treated as an eligible rollover distribution by reason of subsection (c)(11), or section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B), if the requirements of subsection (c)(11) were satisfied.’’
- (B) Clause (i) of section 402(c)(11)(A) of the 1986 Code is amended by striking ‘‘for purposes of this subsection’’.
(C) The amendments made by this paragraph shall apply with respect to plan years beginning after December 31, 2008.
Reconciling Section 9(f) of H.R. 3361 with Section 9(e) of the Engrossed version of S. 1974 should go smoothly, as Section 9(e) of S. 1974 states:
(e) AMENDMENTS RELATED TO SECTION 829.—
(1) Section 402(c)(11) of the 1986 Code is amended—
(A) by inserting ‘‘described in paragraph (8)(B)(iii)’’ after ‘‘eligible retirement plan’’ in subparagraph (A), and
(B) by striking ‘‘trust’’ before ‘‘designated beneficiary’’ in subparagraph (B).
(2)(A) Section 402(f)(2)(A) of the 1986 Code is amended by adding at the end the following new sentence: ‘‘Such term shall include any distribution which is treated as an eligible rollover distribution by reason of section 403(a)(4)(B), 403(b)(8)(B), or 457(e)(16)(B).’’
(B) Clause (i) of section 402(c)(11) of the 1986 Code is amended by striking ‘‘for purposes of this subsection’’.
(C) The amendments made by this paragraph shall apply with respect to plan years beginning after December 31, 2008.
[tags]Pension Protection Act, PPA, IRS, HR 3361, S 1974, Pension Protection Technical Corrections Act, rollovers, nonspouse beneficiaries, ERISA[/tags]
I believe you may be misinterperting the section of the PPA Tech Act. The amendmendts stated in the section of the Tech Corrections Act become effective 1/1/2009. The effective date of Sec. 829 as originally passed allowing for non-spouse Rollovers is not retroactively eliminated until 2009. The changes made by the corrections act to sec 829 of PPA are mostly coordinating corrections to other areas of the code.
Please correct me if you have a different interpertation.