Key Provisions of the Pension Protection Act of 2006 and the Worker, Retiree, and Employer Recovery Act of 2008

• Author: Seymour Goldberg
• Profession: Senior partner in the law firm of Goldberg & Goldberg, P.C., Woodbury, New York
• Pages: 24-28

24

KEY PROVISIONS OF THE

PENSION PROTECTION

ACT OF 2006

AND THE WORKER, RETIREE,

AND EMPLOYER RECOVERY ACT

OF 2008

The Pension Protection Act of 2006 permits a nonspouse beneficiary of

an eligible retirement plan to establish an inherited IRA. Certain trusts

may qualify for this relief as well. These provisions apply to nonspouse

beneficiaries with respect to amounts payable from a qualified retirement

plan, governmental section 457 plan, and a 403(b) tax sheltered annuity.

If the paperwork is done correctly and spousal consent, if applicable,

is obtained, then a nonspouse beneficiary and certain trusts can be the

beneficiary of a participant’s death benefit from an eligible retirement

plan for the purpose of establishing an inherited IRA. The Pension Pro-

tection Act provision was optional. However, under the Worker, Retiree,

and Employer Recovery Act of 2008 (WRERA), this provision is manda-

tory for plan years commencing after December 31, 2009.

Internal Revenue Code at Section 402(c)(11)(A) discusses distri-

butions to an inherited IRA of a nonspouse beneficiary of an eligible

retirement plan. It indicates that it must be made from an eligible re-

tirement plan of a deceased employee by means of a direct transfer to an

inherited IRA or an inherited IRA annuity established for purposes of

receiving the distribution on behalf of an individual who is a designated

beneficiary of an employee and who is not the surviving spouse of the

employee.

Internal Revenue Code Section 402(c)(11)(B) provides that certain

trusts are treated as beneficiaries for the above purposes if the trust sat-

isfies the IRS rules.