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February 16, 2009

Rollover IRA

Your Guide

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Definition

Also called a Conduit IRA.

A Traditional IRA that holds only assets there were distributed from a qualified plan , 403(b) account or 457(b) plan

If other assets are added to the IRA, including regular IRA contributions, the account is no longer a rollover IRA.

Assets are usually maintained in a rollover IRA, to maintain the eligibility of those assets to be rolled-back to a qualified plan , 403(b) or 457(b) plan.

Prior to 2002, before EGTRRA went into effect, 403(b)s and qualified plans could accept rollovers from IRAs only if the IRA was a rollover IRA. Effective for distributions that occur after December 31,2001, qualified plans, 403(b)s and 457(b) plans can accept rollover contributions from any Traditional IRA, SEP IRA, or SIMPLE IRA-providing the SIMPLE IRA has met the 2-year requirement. The rollover cannot include non-taxable amounts, or  amounts ineligible for rollover-such as RMD amounts

 

Referring Cite

IRC § 408(a) , IRC § 408(d)(3)(A)(ii), Instruction 1099-R&5498

 

Additional Helpful Information

  • A qualified plan is not required to accept rollovers
  • A qualified plan that accepts rollovers from IRAs, can limit the type of IRA from which they will accept rollovers. For instance, some plans accept only rollovers from rollover IRAs.
  • Certain beneficial tax-treatment, capital gains and income averaging treatment  that apply to qualified plan assets may be preserved if the assets are maintained in a rollover IRA.

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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