CCA 200924046: Retirement-plan transfer could not be completed as a rollover

Plain-English summary

Chief Counsel gave a preliminary view that a proposed transaction involving money in a defined contribution plan and funding obligations of a defined benefit plan could not be completed as a rollover. It described a possible alternative if the taxpayer had unpaid minimum funding obligations. The taxpayer could withdraw the needed money from the defined contribution plan, pay income tax and the section 72(t) tax, contribute the proceeds to the employer's capital, and have the employer contribute the money to the defined benefit plan. The email referred the recipient to another person for further analysis.

Ruling snapshot

• Question: Could money associated with a defined contribution plan be moved to satisfy defined benefit plan funding obligations as a rollover?
• Outcome: Advice given, the transaction could not be done as a rollover
• Key authorities: IRC § 72(t)

Full text (IRS public release)

ID: CCA-409307-09 Number: 200924046
Release Date: 6/12/2009
Office: ----------------------------
UILC: 72.00-00

From: ----------------------
Sent: Thursday, April 09, 2009 3:07 PM
To: -----------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Subject: RE: Question from the field – --------------------

-------
I was in a meeting when ---------called and --------(my secretary) gave me a message. I just got off the phone with ---------and my impression is that the taxpayer's transaction cannot be done, at least it cannot be done as a rollover. Of course, if the taxpayer has unpaid minimum funding obligations to fund the defined benefit plan, he could take the money he needs out of the defined contribution plan, pay tax on it, pay the 72(t) tax, and use the proceeds to make a contribution to the capital of the employer and then have the employer turn around and contribute the money to the defined benefit plan.

The upshot of my conversation with ---------was that she would check with --------- ---------------and see if he can help you with the analysis of this transaction. I can be reached at ---------------------if you or ---------wish to call me on this question. I will be in the office for another hour and a half.