Roth IRA Prototype Updated
Rev. 07/13/07, E-mail Alert 2007-9

Amendments to Roth Prototype IRA documents

Sponsors of prototype Roth IRAs who wish to accept rollover contributions from designated Roth accounts described in § 402A of the Internal Revenue Code must amend their prototype Roth IRA documents to reflect that the Roth IRA permits these rollover contributions according to IRS Announcement 2007-55.

Internal Revenue Code § 402A authorizes employers to offer, beginning in 2006, a qualified Roth contribution program as part of a § 401(k) plan or a § 403(b) plan. An eligible rollover distribution from a designated Roth account established under the program can be rolled over only to another designated Roth account or to a Roth IRA. Currently approved prototype Roth IRAs do not contain language permitting the acceptance of rollovers from designated Roth accounts.

Sponsors of prototype Roth IRAs may now wish to amend their documents to provide for the acceptance of rollovers from designated Roth accounts. In order for a Roth IRA that is intended to be a prototype Roth IRA to accept an eligible rollover contribution from a designated Roth account prior to an amendment permitting such rollovers, the prototype Roth IRA document must be amended and adopted no later than December 31, 2007. Thus, if a prototype Roth IRA accepts a rollover from a designated Roth account prior to the date of amendment, the mere acceptance of such rollover contribution will not affect the Roth IRA’s prototype status provided the adoption of the amendment is timely. No application to the Service is required for continued reliance on an Opinion Letter. The model Roth IRAs (Forms 5305-R, 5305-RA and 5305-RB) already contain language permitting the acceptance of rollovers from designated Roth accounts, thus, users of such forms do not need to amend their IRA document to permit such rollovers.

McKay Hochman will be sending out both a short form Amendment as well as a completely revised Roth IRA Trust and the Roth Custodial Account Agreements within the next week. Please adopt the Amendment on the Sponsor level and send all your current Roth IRA clients a copy of the amendment. If you have any question, or wish to purchase one of our Roth Agreements, please don’t hesitate to call.