News & Views

Eligible retirement plans that separately account for amounts attributable to rollover contributions may permit the distribution of amounts attributable to a rollover, at anytime, at the individual's request.

Under Revenue Ruling 2004-12, 2004-7 IRB, if an eligible retirement plan separately accounts for amounts attributable to rollover contributions, distributions of these amounts are not subject to Internal Revenue Code restrictions on permissible timing. Instead, the plan may distribute the amounts at anytime, as directed by the participant.

For example, an in-service distribution of rollover contributions in a money purchase pension plan may be permitted. The money purchase pension plan must separately account for the rollover contribution amounts.

Even though rollover contributions may be distributed at any time, the rollover amounts still are subject to the minimum distribution rules, the survivor annuity requirements of Internal Revenue Code Sections 401(a)(11) and 417 and the 10% penalty tax on premature distributions under Internal Revenue Code Section 72(t).

Thus, for example, if a distribution from an IRA is rolled over into an employer plan, any distribution from the employer plan would be subject to the exceptions from the Internal Revenue Code Section 72(t) tax that applies to Internal Revenue Code Section 401(a) plans, and not subject to the exceptions that apply to IRAs.

This ruling does not apply to amounts received by a plan as a result of a merger, transfer or consolidation of plan assets, nor to plan-to-plan transfers permitted between Section 457 eligible governmental plans, and between Section 403(b) tax-sheltered annuities.

<< Return to News & Views