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What are the rollover rules as of 2010?
Rev. 04/12/02, Updated 01/12/06, E-mail Alert 2006-1, 01/10/06, E-mail Alert 2008-1; 02/27/09, E-mail Alert 2009-3, 01/19/2010, E-mail Alert 2010-1
PORTABILITY CHART AS OF 2010
Rollover to Recipient Plan
|
| |
TO: |
Traditional
IRA & SEP |
SIMPLE
IRA |
403(b) |
Gov't
457(b) |
Qualified
Plan |
Roth
401(k &
403(b) Acct. |
Roth IRA
|
| FROM: |
|
|
|
|
|
|
Traditional IRA & SEP |
|
Y |
N |
Ya |
Ya |
Ya |
N |
Nf |
SIMPLE IRA |
|
Yb |
Yb |
Yb |
Yb |
Yb |
N |
Yb |
403(b)-
Other Than Roth 403(b) |
|
Y |
N |
Yd |
Y |
Yd |
N |
Ye |
Governmental 457(b) |
|
Y |
N |
Y |
Y |
Y |
N |
Ye |
Qualified Plan - Other Than Roth 401(k) |
|
Y |
N |
Yd |
Yc |
Yd |
N |
Ye |
Designated Roth 401(k) or 403(b) by Direct Rollover.
Chart below has participant rollover and 5-year clock.
|
|
N |
N |
N |
N |
N |
Y |
Y |
Roth IRA |
|
N |
N |
N |
N |
N |
N |
Y |
SUPERSCRIPT LEGEND
a Only Pretax amounts from an IRA or SEP may be rolled to these plans.
b Rollovers from SIMPLE IRAs are prohibited until after 2 years of participation.
c Pretax amounts only
d After-tax amounts may be received only by direct transfer or direct rollover.
e PPA permits direct rollover from a non-Roth qualified plan source, non-Roth 403(b) source and governmental 457(b) to a Roth IRA as of 2008. However, the direct rollover pretax amount is taxable in the year directly rolled to a Roth IRA. As of 2010, TIPRA permits conversion to a Roth IRA without AGI limit, and without joint return requirement for married individuals.
f Traditional IRAs & SEP IRAs may not be rolled into a Roth IRA, but there is a conversion process. As of 2010, TIPRA permits conversion to a Roth IRA without AGI limit, and without joint return requirement for married individuals.
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Designated Roth Distribution, Taxation and Reporting Final Regulations
Highlights of the Rollover Rules (with citations)
Rev. 06/22/07, E-mail Alert 2007-8
IRS final regulations on designated Roth account distributions, taxation, and reporting are found in:
1.402A-1 Q&A 1-14 Designated Roth Accounts
1.402A-2 Q&A 1-4 Reporting and recordkeeping requirements with respect to designated Roth Accounts
1.408A-10 Q&A 1-6 Coordination between designated Roth accounts and Roth IRAs
Portability of a Distribution Originating from a Designated Roth 401(k)/403(b) Account
And the 5-Year Clock
|
| |
Direct Rollover
to
Roth 401(k) |
Direct Rollover
to
Roth IRA |
Participant Rollover
to Roth 401(k)
(Within 60 days) |
Participant Rollover
to
Roth IRA
(within 60 days) |
Ability to Move Designated Roth Contribution |
Y
1.402A-1 Q&A 5a |
Y
1.408A-10 Q&A 1 |
N
1.402A-1 Q&A 5a |
Y
1.402A-1 Q&A 5a |
Ability to Move Earnings on Designated Roth Contribution |
Y
1.402A-1 Q&A 5a |
Y
1.408A-10 Q&A 1 |
Y
1.402A-1 Q&A 5a |
Y*
1.402A-1 Q&A 5a & d |
The Five-Taxable-Year Period Determination |
The five-taxable-year period starts on the earlier of:
the first Roth contributions made to the distributing plan, or
the first year of the five-year-period for the Roth contributions made in the receiving plan, if earlier.
1.402-A Q&A 4b |
Nonqualified Distributions are determined based on the first contribution made to the Roth IRA.
1.408A-10 Q&A 4
Qualified distributions are treated as "basis" in the Roth IRA (and the ordering rules of Roth IRA apply - if earnings accrued after being in the Roth IRA are not qualified). |
The five-taxable-year period starts on the first year of the five-year period for the Roth contributions made in the receiving plan.
Note: the five-year-taxable period from the distributing plan is not carried over to the recipient plan.
1.402A-1 Q&A 5c |
Nonqualified Distributions (earnings) only are determined based on the first contribution made to the Roth IRA. 1.402A-1 Q & A 5b
1.408A-10 Q&A 4
Qualified distributions are treated as "basis" in the Roth IRA (and then ordering rules of Roth IRA apply - if earnings accrued after being in the Roth IRA are not qualified). |
Recipient Plan Tracking |
The five-taxable-year period starts on the earlier of:
The first Roth contributions made to the distributing plan, or
The first year of the five-year-period for the Roth contributions made in the receiving plan, if earlier.
1.402A-1 Q&A 4b |
Five-taxable-year period tracking begins with the start of the Roth IRA. So if a new Roth IRA, then five year clock starts at that time.
If an existing Roth IRA, the amount rolled in uses the five-year clock of the existing Roth IRA. 1.408A-10 Q&A 4 |
The five-taxable-year period starts on the first year of the five-year-period for the Roth contributions made in the receiving plan.
Note: the five-year-taxable period from the distribution plan is not carried over to the recipient plan.
1.402A-1 Q&A 5c |
Five-year-taxable period tracking begins with the start of the Roth IRA. So if a new Roth IRA, then five-year clock starts at that time.
If an existing Roth IRA, the amount rolled in uses the five-year clock of the existing Roth IRA. 1.408A-10 Q&A 4 |
Reporting |
Roth Amount, Earnings and the Beginning date of the five-taxable-year period information or if a qualified distribution
to be provided within 30 days of the Direct Rollover.
1.402A-2 Q&A 2(a) (1) |
Roth Amount, Earnings, and the beginning date of the five-year-taxable period information,
or
if a qualified distribution
to be provided within 30 days of the Direct Rollover.
Note: Although it seems unnecessary to report the first day of the five-year-period when directly rolling to a Roth IRA, the regulations state to provide this in the report when a direct rollover is made from a designated Roth. |
Roth Amount, Earnings,
or
if a qualified distribution
to be provided upon request within 30 days of request
1.402A-2 Q&A 2(a)(1) and 2(b)
New report to be issued by recipient institution; details to be announced by IRS.
1.402A-2 Q&A 3 |
Roth Amount, Earnings
or,
if a qualified distribution
to be provided upon request of participant within 30 days of request.
1.402A-2 Q&A (a)(1) and 2(b)
New report to be issued by recipient institution, details to be announced by IRS.
1.402A-2 Q&A 3 |
Other |
This is the exclusive method to move the after tax portion of the Roth 401(k) to another Roth 401(k)
1.402A-1 Q&A 5a |
The AGI limitation for eligibility for a Roth IRA contribution does not apply to the ability to roll a Roth 401(k) into a Roth IRA.
1.408A-10 Q&A 2 |
A nonqualified distribution of a Roth 401(k) requires a pro rata distribution of earnings and after-tax amounts.
1.402A-2 Q&A 2 |
The AGI limitation for eligibility for a Roth IRA contribution does not apply to the ability to roll a Roth 401(k) into a Roth IRA. 1.408A-10 Q&A 2 |
| *If a partial rollover, then taxable portion of nonqualified distribution is rolled in first. |
| Other Rollover Issues |
| Restriction on Roth IRA |
403(b) Plan Rollovers |
A Roth IRA may not be rolled into a Roth 401(k) or a Roth 403(b).
1.408a-10 Q&A 5 |
The rules applicable to rolling a Roth 403(b) to another Roth 403(b) or to a Roth IRA are similar to the Roth 401(k) rules. A direct rollover from a Roth 403(b) to a Roth 401(k) or vice versa is permitted by the PPA. |
Roth 401(k) Final Distribution Regulations Article
Roth 401(k) Final Regulations Article
Bill Grossman, QPA, ERPA
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