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February 19, 2009

Direct conversion

Your Guide

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Definition

A Roth Conversion that occurs directly between the delivering retirement account and receiving Roth IRA. The delivering account can be either of the following:
  • A traditional IRA
  • A SEP IRA
  • A SIMPLE IRA, providing it has been at least two years since the first contribution was deposited to the SIMPLE IRA
  • A qualified plan, providing the individual is eligible to make a withdrawal from the plan and the amount is rollover eligible
  • A  403(b) account , providing the individual is eligible to make a withdrawal from the plan and the amount is rollover eligible
  • A  403(a) annuity plan , providing the individual is eligible to make a withdrawal from the plan and the amount is rollover eligible
  • A governmental 457(b) plan, providing the individual is eligible to make a withdrawal from the plan and the amount is rollover eligible
Under a direct conversion, the assets are made payable to the Roth IRA custodian for benefit of (FBO) the Roth IRA owner. The direct conversion can be made between accounts at the same financial institution, or between accounts held at different financial institutions.
Note: Effective January 1, 2008, Roth conversions can occur from qualified plans, 457(b) and 403(b) plans to Roth IRAs. Prior to this date, the assets were required to be first be rolled to a Traditional IRA or SEP IRA before being converted to a Roth IRA.
Referring Cite
IRC §408A, IRS Publication 590
Additional Helpful Information

Important: The Tax Cuts and Jobs Act of 2017 repealed the option to recharacterize Roth conversions, for Roth conversions done after 2017. As such, only regular contributions to traditional IRAs and Roth IRAs may now be recharacterized.


  • [1][IRC §408A(d)(3)(A)(ii)

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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