Direct Rollover Option

PURPOSE: This rule describes the direct rollover option authorized by section 50.1260, RSMo. (1) A distributee may elect to have an eligible rollover distribution paid directly to a single eligible retirement plan specified by the distributee. However, this election may not be made if the total eligible rollover distributions paid to the distributee will be less than two hundred dollars ($200). (2) A distributee may elect to divide an eligible rollover distribution so that part is paid directly to an eligible retirement plan and part is paid to the distributee. However, the part paid directly to the eligible retirement plan must total at least five hundred dollars ($500). (3) A distributee will be provided with an initial notice in compliance with the rules of Internal Revenue Code (Code) section 402(f), advising the distributee that there will be withheld an amount equal to twenty percent (20%) (or such other amount as may from time to time be prescribed by the Code or the Secretary of Treasury or his or her designate) on any eligible rollover distribution that is not transferred directly to an eligible retirement plan. In general, payment to a distributee shall begin no sooner than thirty (30) days after the initial notice is given. However, payment may be made sooner if the notice clearly informs the distributee of the right to a period of at least thirty (30) days to consider the decision of whether or not to make a direct rollover, and the distributee, after receiving the notice, makes an affirmative election to either receive an immediate distribution or directly roll over the eligible rollover distribution to an eligible retirement plan. If, however, the distributee fails to make any such affirmative election within thirty (30) days after the initial notice is given, the distributee will be provided with a second notice, affording the distributee with an additional opportunity to make an affirmative election. If the distributee fails to make an affirmative election within the thirty (30)-day period after the second notice is given to either receive an immediate distribution or directly roll over the eligible rollover distribution to an eligible retirement plan, the distributee will be treated as having made an affirmative election to receive an immediate distribution, and, accordingly, the eligible rollover distribution (less the twenty percent (20%) required to be withheld) will be paid to the distributee immediately after such thirty (30)-day period expires. (4) For purposes of this regulation, the following terms have the meanings set forth below: (A) An “eligible rollover distribution” is any distribution or withdrawal payable under the terms of this plan to a participant or a participant’s beneficiary, which is described in Code section 402(c)(4). In general, this term includes any singlesum distribution, and any distribution which is one in a series of substantially equal periodic payments made over a period of less than ten (10) years, and is less than the distributee’s life expectancy. However, an eligible rollover distribution does not include the portion of any distribution that constitutes a minimum required distribution under Code section 401(a) (9). A portion of a distribution shall not fail to be an eligible rollover distribution merely because the portion consists of after-tax employee contributions which are not includible in gross income. However, effective January 1, 2007, such portion may be paid only to an individual retirement account or RETIREMENT FUND annuity described in section 408(a) or (b) of the Code, or to a qualified trust, or to an annuity contract described in section 403(b) of the Code, if such trust or contract separately accounts for amounts so transferred (and interest thereon), including separately accounting for the portion of the distribution which is includible in gross income and the portion of such distribution which is not so includible. (B) “Eligible retirement plan” means: 1. An individual retirement account described in Code section 408(a); 2. An individual retirement annuity described in Code section 408(b); 3. An annuity plan described in Code section 403(a); 4. An annuity contract described in Code section 403(b); 5. An eligible plan under Code section 457(b) which is maintained by an eligible employer described in Code section 457(e)(1)(A); 6. A qualified trust described in Code section 401(a), but only if the terms of the plan permit the acceptance of rollover distributions; and 7. Effective January 1, 2008, a Roth IRA described under Code section 408A, to the extent permitted by applicable law. (C) “Distributee” means a participant or the spouse of a deceased participant. Effective January 1, 2007, a participant’s designated non-spouse beneficiary may be a distributee but only with respect to an eligible retirement plan described in paragraphs (4)(B)1. and 2. above. AUTHORITY: section 50.1032, RSMo 2000.* Original rule filed Sept. 29, 2000, effective March 30, 2001. Amended: Filed July 6, 2001, effective Jan. 30, 2002. Amended: Filed Nov. 10, 2005, effective May 30, 2006. Amended: Filed Jan. 25, 2010, effective July 30, 2010. *Original authority: 50.1032, RSMo 1995.