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April 15, 2009

Qualified Rollover Contribution

Your Guide

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A qualified rollover contribution is a Roth IRA conversion. The following transactions are qualified rollover contributions:
1.A rollover contribution from a traditional IRA, SEP IRA or SIMPLE IRA to a Roth IRA, and
2.A rollover contribution from a qualified plan, 403(b) account, 403(a) annuity, or governmental 457(b) plan to a Roth IRA
Under Number 1, the following applies[1]:
  • If the amount was paid (distributed) to the Roth IRA onwer, the amount is credited to the Roth IRA within 60-days of the Roth IRA owner receiving the assets. If the transaction is done as a direct conversion, the 60-day limit is a non-issue.
  • The distribution is not made from an inherited IRA. Non-spouse beneficiaries cannot convert inherited traditional, SEP or SIMPLE IRAs to Roth IRAs
  • The amount credited to the Roth IRA does not include the individual’s RMD for the year that the conversion occurs. If the individual is subject to the RMD rules, the RMD must be withdrawn before the conversion occurs.
  • If the delivering IRA is a SIMPLE IRA, it must have been at least two years since the first contribution was deposited to the SIMPLE IRA, and
  • The amount is rollover eligible
Under number 2, the following applies[2]:
  • If the amount was paid ( distributed) to the Roth IRA owner, the amount distributed is credited to the Roth IRA within 60-days of the Roth IRA owner receiving the assets. If the transaction is done as a direct rollover, the 60-day limit is a non-issue.
  • The amount credited to the Roth IRA does not include the individual’s RMD for the year that the conversion occurs. If the individual is subject to the RMD rules, the RMD must be withdrawn before the conversion occurs.
  • The amount is rollover eligible
Referring Cite
IRC §408A(e)
Additional Helpful Information

 


[1] IRC § 408(d)(3)
[2] IRC § 408A(e)(2)(B)

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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