- quote -

And that is excellent advice which I also give clients.
Several reasons of course:
1. You have more control over it if at a local institution.
2. You know that it is NOT all invested in your previous
employer's stock.
3. Rules might change.
4. It will be simpler for your beneficiaries.

ChEAr$,
Harlan Lunsford, EA n LA
Fri 10 mar 2006

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- quote -

The IRS issued new regulations on this in 2002 and a lot of
plan administrators have not caught up with the new rules
yet. There are severe penalties for not taking required
minimum distributions, and these plan administrators tend to
take an overly conservative approach to these distributions
in order to keep themselves out of hot water. You usually
won't be able to get them to budge unless you are able to
cite some authority to someone in their legal department.

Under the new regulations, for a 401(k) plan where the
participant was over age 70.5 at the time of death and where
there was a nonspouse desginated beneficiary, the
distributions may be taken using the longer of the
participant's or the designated beneficiary's life
expectancy at the time of the participant's death. Treasury
Reg 1.401(a)(9)-5, Q&A 5(a)(1).

The rules are different where the participant had not
reached age 70.5 at the time of death.

Note also that if there was a trust or estate named as the
beneficiary, rather than the individual beneficiaries being
named directly, the analysis gets more complicated.

--Chris Ballard

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hlunsford[at]bellsouth.net wrote:
- quote -

I was just asked this question by a co-worker. We work for
a company for whom Hewitt is the custodian of 401(k) plan.
From the Hewitt screens;

"Payments to Your Beneficiaries

If You Die On or After the Required Beginning Date

If you die on or after the date you're required to begin
receiving minimum distributions from the plan, your
beneficiary (or beneficiaries) must begin receiving payments
by December 31 of the year following your death. Required
minimum distributions are calculated using life expectancy
tables."

Now, for sake of completeness, there's a five year rule
refered to in this other circumstance;

"If You Die Before the Required Beginning Date

If you die before the date you're required to begin
receiving minimum distributions from the plan, your
beneficiary (or beneficiaries) will be paid as explained
below.

If Your Spouse Is Your Beneficiary

If your spouse is your beneficiary, required minimum
distributions are calculated using his or her life
expectancy and must begin by the later of:

* December 31 of the year following the year in which
you die
* December 31 of the year in which you would have reached
age 70-1/2

If Someone Other Than Your Spouse Is Your Beneficiary

If your beneficiary is a person other than your spouse,
required minimum distributions are calculated using your
beneficiary's life expectancy and must begin by December 31
of the year following your death.

If your beneficiary doesn't begin receiving payments by
December 31 of the year following your death, then the
entire vested account balance must be paid by the December
31 that follows the fifth anniversary of your death."

So it appears that there's a case where there is a five year
rule, but that does seem to apply to the OP.

Given all the opportunity for confusion, I continue to
recomend to those who ask my advise, that they roll their
401(k) into an IRA upon retiring. Even if the IRS is clear
about distributions, most end consumers aren't and many
custodians aren't as well. Even if all all clear on the IRS
regs, not all 401(k) custodians permit a lifetime payout.

JOE (joetaxpayer at earthlink dot net)

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<bbs[at]mechanicsofmoney.com> wrote:

- quote -

Non-spouse 401(k) beneficiaries can't roll the funds
anywhere.

Information about required distributions to beneficiaries is
in Pub 575 in the chapter on additional taxes.

--
Phil Marti
Clarksburg, MD

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I beleive that the answer might be that the tax law does not
require that you take distributions w/in 5 years (I would
need to know more, to determine if this were the case), but
in most cases 401k's do specifically require distributions
be taken sooner. If your plan administrator is not willing
to let you do what you want, you might talk to your advisors
about rolling the funds into a plan that will.

Gary Brolis
http://www.MechanicsofMoney.com
http://www.MechanicsofMoney.com/blog.php

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au109lee[at]yahoo.com wrote:

- quote -

Here's a 96% assurance based on my memory; yes, the company
is correct, and that IRS spokesman/woman/person was wrong.
It happens.

Now IRA accounts have different rules and the IRS person may
have gotten mixed up.

ChEAr$,
Harlan Lunsford, EA n LA

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I am a non-spousal beneficiary of a 401K plan. The plan
participant was taking distributions at time of death, was
77 years old, and had designated beneficiaries. The plan
administrator says I need to withdraw all the money within 5
years. My accountant says that I don't have to withdraw all
the money within 5 years unless it says so in the plan
document. The plan document doesn't say I have to withdraw
all the money within 5 years. The company doesn't claim the
plan document requires me to withdraw the money but says the
IRS requires me to withdraw all the money within 5 years
unless I buy an annuity. The person I spoke with at the IRS
says that the IRS does not require me to withdraw all the
money in 5 years. The plan administrator says that a "Legal
letter of direction" from the company is making them require
me to withdraw all the money within 5 years. The company
insists that it is an IRS regulation under something called
411(d). Does anyone really KNOW the answer to this? Please
help me.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >