Can I roll a death benefit from a non-spouse into the 401(k)?
No. A non-spouse beneficiary can choose a direct rollover to an IRA established on behalf of the designated beneficiary that will be treated as an inherited IRA. The IRA must be established in a manner that identifies it as an IRA with respect to a deceased individual and also identifies the deceased individual and the beneficiary, for example, “Tom Smith as beneficiary of John Smith.” A direct rollover is not subject to tax withholding and the beneficiary is not taxed on the money until it is later withdrawn from the IRA. If a non-spouse beneficiary chooses a lump sum distribution, the distribution is subject to federal tax withholding at the rate of 10%; however, the beneficiary can choose to have no tax withheld by submitting Form W-4P to PERSI. Non-spouse beneficiaries may not leave funds in the Choice Plan. Pending changes in the plan will require funds to be paid out within 15 months after the member’s death.
