The Pension Protection Act of 2006 PPA ’06 §829(a)(1) added §402(c)(11) to the Internal Revenue Code to allow nonspouse beneficiaries to roll over distributions from a qualified plan to an individual retirement plan. In Notice 2007-7, the IRS stated that nonspouse beneficiary rollovers are an optional plan provision. On the IRS plan amendments for 2007 webpage, the IRS has revisited this guidance. On their website the IRS indicated that pursuant to an impending technical correction, nonspouse beneficiary rollovers will be a required plan provision for plan years beginning on or after January 1, 2008. See section 9(e) of S. 1974, the Pension Protection Technical Corrections Act of 2007, as introduced in the Senate on August 2, 2007 and section 9(e) of H.R. 3361, the Pension Protection Technical Corrections Act of 2007, as introduced in the House of Representatives on August 3, 2007.

Thus, the IRS has changed its guidance on the nonspouse beneficiary rollover being a plan sponsor optional plan provision to a required plan document provision, similar to how the eligible rollover distribution provisions of 401(a)(31) are required plan provisions.  However, the change is not effective until 2008.

Since this is an optional plan provision in 2007, for it to be operative, a board resolution is still recommended (keep in mind that PPA and the IRS have stated that no plan amendment is needed until 2009, so just a board resolution was the recommendation).

To reiterate, in 2008, the IRS states that the PPA nonspouse beneficiary rollover rules will be required in the operation of qualified plans; and in 2009, it will be part of the required provisions to be included in the PPA plan document amendment.

The IRS webpage is: http://www.irs.gov/retirement/article/0,,id=173372,00.html