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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The Employee Benefits Security Administration (EBSA) has issued a proposed amendment to a prohibited transaction exemption that would clarify the rollover of benefits to an inherited IRA for missing, designated nonspouse beneficiaries. This amendment to the class exemption, prohibited transaction exemption (PTE) 2006-6, has been issued concurrently with final regulations on abandoned plans that contain a regulatory safe harbor (see above).
Among other things, PTE 2006-6 permits a "qualified termination administrator" (QTA) of an individual account plan that has been abandoned by its sponsoring employer to select itself to provide services to the plan in connection with the plan's termination, and to pay itself fees for those services. The current exemption provides relief to a QTA that selects itself as the provider of an inherited IRA under the safe harbor. EBSA wants to make clear that the exemption permits a QTA to designate not only itself, but also an affiliate as the provider of an inherited IRA for a nonspouse beneficiary who has not returned a distribution election.
Allowing QTAs to use their own or affiliated investment products to receive the distributions on behalf of nonspouse beneficiaries who have failed to make investment decisions facilitates the orderly termination and winding-up of a plan's affairs. Further, QTAs are not required to make use of proprietary or affiliated inherited IRAs for the benefit of nonspouse beneficiaries. EBSA asserts that fee limitations, which are a condition of the exemption and applicable to distributions on behalf of nonspouse beneficiaries as well as other distributions, will encourage QTAs to make appropriate decisions regarding whether to use proprietary or affiliated products based on whether doing so will be in the best interests of participants and beneficiaries.
The rollover to IRAs on behalf of missing, nonspouse beneficiaries is structured to fully comply with Internal Revenue Code requirements. Moreover, these rollover distributions would not trigger immediate tax consequences and mandatory tax withholding for the nonspouse beneficiary.
For more information on this and related topics, consult the CCH Pension Plan Guide.
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