Compliance February 14, 2007

IRS Clarifies Nonspouse Rollover Guidance

February 14, 2007 (PLANSPONSOR.com) - Faced with questions on already-issued guidance about nonspouse rollover rules, regulators have further clarified several issues including whether a plan is required to allow nonspouse beneficiaries to roll over inherited funds to an IRA.
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Released in January,  the guidance governed how to implement new rules from the Pension Protection Act (PPA)   on a variety of qualified plan distributions (See  Regulators Issue Post-PPA Distribution Guidance).

Regulators had a quick answer on the nonspouse rollover issue in the  latest clarification : “Pursuant to § 402(c)(11) of the Code and Notice 2007-7 Q&A-14, a plan may, but is not required to, offer a direct rollover of a distribution to a nonspouse designated beneficiary.”

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“This is consistent with the IRS’ previously stated position that the distributing plan must be amended to provide for rollovers by non-spouse beneficiaries and that the amendment was optional, not mandatory,” Los Angeles attorney Bob Lowe of the Mitchell Silberberg & Knupp LLP firm wrote in  an advisory bulletin .

The latest IRS release also dealt with the issue of whether nonspouse beneficiaries who make a rollover to an IRA have the right to stretch out distributions over the beneficiary’s life expectancy, even if the distributing plan would not have provided this right.

Regulators responded that a non-spouse beneficiary can use the life expectancy payout in the IRA provided that the rollover from the distributing plan is made no later than the last day of the year following the year in which the participant died.

In his advisory bulletin, Lowe urged potential users of the rollover to discuss the issue with their financial advisers.

“What all this means for non-spouse beneficiaries (and their advisors) who want to be able to stretch out distributions in a rollover IRA is that if they wait too long to make the rollover they may lose the opportunity to use the life expectancy rule in their rollover IRA,” Lowe wrote.

Benefits February 13, 2007

Health Benefits for WA State Workers Drops Slightly in 2006

February 13, 2007 (PLANSPONSOR.com) - The number of state of Washington employers offering health care to their full-time employees fell by a slight 0.7% in 2006, but was in some cases offset by higher wages, according to a recent survey.

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The dip from 67.1% in 2005 to 66.4% in 2006 was the second year in a row a decline was reported, following the 2004 figure of 67.8%, according to a statement released Monday about the survey of 8,386 employers.by the Washington Department of Employment Security.

The number of employers offering health benefits to their part-time workers also dropped from 15.1% in 2004 and 2005 to 14.2% in 2006. The number of employers offering these employee benefits was higher among higher salary industries.

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Other findings of the survey include:

  • 42% of employers offered a retirement plan to full-time employees, while 25% offered that benefit to part-time employees.
  • 74% of employers gave full-time employees paid vacation, 26% offered that benefit to part-time workers;
  • 71% of employers gave paid holiday leave to full-time workers, 29% offered that benefit to part-time workers;
  • 54% of employers offered health insurance to the dependents of full-time employees, 12% offered that benefit to the dependents of part-time employees; and
  • 46% of employers offered paid sick leave to full-time employees, while 18% offered that benefit to part-time employees.

The full results of the 2006 Washington State Employee Benefits Report arehere .

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