# Prop. Treas. Reg. § 1.402(c)-2: Eligible rollover distributions. Proposed regulation, not in force. REG-103529-23, 89 FR 58644, published 2024-07-19 . Interprets 26 U.S.C. § 402. Par. 8. Section 1.402(c)-2, as revised in a final rule published elsewhere in this issue of the Federal Register , effective September 17, 2024, is amended by: a. In the first sentence of paragraph (f)(1), removing “paragraphs (f)(2) and (3)” and adding in its place “paragraphs (f)(2) through (4)”; b. Redesignating paragraph (f)(3) as (f)(4) and adding new paragraph (f)(3); and c. Adding paragraph (j)(4)(vii). The addition and revision read as follows: * * * * * (f) * * * (3) Distributions from designated Roth accounts. If a distribution is not taken into account for purposes of section 401(a)(9) under the rule in § 1.401(a)(9)-5(g)(2)(iii), then it is not treated as a distribution that is a required minimum distribution for purposes of this paragraph (f). * * * * * (j) * * * (4) * * * (vii) Example. (A) Facts. Employee A is a participant in Plan X, sponsored by Employer M. A, who was born in 1957, died in 2024 (the calendar year A would have reached age 67 and accordingly before A's required beginning date), having named A's surviving spouse, B, who was born in 1958, as the sole beneficiary. The applicable age for both A and B is 73. In accordance with the terms of Plan X, B is subject to the 10-year rule. B takes a $1,000 distribution in 2031 (the calendar year in which B reaches age 73). B takes no further distributions until taking a distribution of A's remaining interest in Plan X in 2033 (the ninth calendar year following the year of A's death, when B is age 75 and A would have reached age 76). The account balance as of December 31, 2032, was $100,000, and the distribution of the remaining interest to B equals $103,000. B would like to roll over the distribution to B's own IRA to the extent the distribution does not constitute a required minimum distribution. (B) Catch-up of required minimum distributions required. Because the distribution is made in a calendar year after B attained the applicable age and B intends to roll over the distribution to B's own IRA, this paragraph (j)(4) applies to determine the portion of the distribution that is treated as a required minimum distribution. The first applicable year (determined in accordance with paragraph (j)(4)(iv) of this section) is 2031 (the calendar year in which B reached age 73 and the seventh year after the year of A's death). Pursuant to paragraph (j)(4)(ii) of this section, the portion of the $103,000 distributed in 2033 that is not an eligible rollover distribution because it is treated as a required minimum distribution under section 401(a)(9), is the excess, if any, of the sum of the hypothetical required minimum distributions, determined in accordance with paragraph (j)(4)(iii) of this section for each calendar year beginning with the first applicable year and ending in the year of distribution over the sum of the actual distributions made in each calendar year beginning with the first applicable year and ending in the year before the year of the distribution. (C) Calculation of hypothetical required minimum distribution. Pursuant to paragraph (j)(4)(iii) of this section, the hypothetical required minimum distribution for 2031 (the year in which B reaches age 73) is $3,773.58 ($100,000.00/26.5). For 2032 (the year in which B reaches age 74), the adjusted account balance is calculated by reducing the $100,000.00 account balance by the excess of the hypothetical required minimum distribution for the first applicable year over the actual distributions made to the surviving spouse in that calendar year, which is $2,773.58 ($3,773.58−$1,000.00). In this case, for the second determination year, the adjusted account balance is $97,226.42 ($100,000.00−$2,773.58) and the hypothetical required minimum distribution for 2032 is $3,812.80 ($97,226.42/25.5). For 2033 (the year in which B reaches age 75), the adjusted account balance is calculated by reducing the $100,000.00 account balance by the excess of the sum of the hypothetical required minimum distributions for determination years preceding 2033 of $7,586.38 ($3,773.58 + $3,812.80) over the actual distributions made to the surviving spouse during those calendar years ($1,000.00), which is $6,586.38 ($7,586.38−$1,000.00). Thus, the adjusted account balance for 2033 is $93,413.62 ($100,000.00−$6,586.38) and the hypothetical required minimum distribution for 2033 is $3,797.30 ($93,413.62/24.6). The portion of the $103,000 distribution of the employee's remaining interest that is treated as a required minimum distribution, and thus not an eligible rollover distribution, is the excess of the sum of the hypothetical required minimum distributions for each determination year in the catch-up period, which is $11,383.68 ($3,773.58 + $3,812.80 + $3,797.30), over the actual distributions made during the calendar years preceding 2033 ($1,000.00), which is $10,383.68 ($11,383.68−$1,000.00). Accordingly, the portion of the $103,000 distribution that is treated as a required minimum distribution is $10,383.68. (D) Calculation of eligible rollover distribution. Pursuant to paragraph (j)(4)(vi) of this section, the plan administrator may assume that, for purposes of section 402(f)(2)(A), a portion of the $103,000 distribution equal to $10,383.68 is not an eligible rollover distribution. However, B could choose to roll over the entire $103,000 distribution to an IRA, provided the IRA is established as a beneficiary IRA, and not as B's own IRA. In that case, in accordance with § 1.408-8(d)(2)(i), the IRA would be subject to the 10-year rule that applied to the spouse under the plan (so that a distribution of the employee's entire interest would be required by 2034). * * * * *