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Roll Over

Roll Over

With so much being written and talked about regarding Roth IRA conversions, you may be wondering whether you can “roll-over” your qualified retirement plan directly into a Roth IRA.  The simple answer is “yes,” because of the passage of the Pension Protection Act of 2006.  The new legislation allows eligible qualified retirement plan assets to be rolled over directly into a Roth IRA beginning January 1, 2008.  There is no longer a requirement that the qualified plan be rolled over to a Traditional IRA and then converted to a Roth IRA.  However, there are rules that must be followed when rolling over qualified assets to a Roth IRA:

  1. The assets must meet the retirement plan’s definition of “eligible rollover distributions”.  Be sure to check with your plan administrator for the plan’s definition and rules regarding rollover distributions.
  2.  At the time of the rollover, you must have a written “irrevocable” election of the rollover.
  3. The rollover can be either “direct” or “indirect.”  A direct rollover is when a check is made payable directly to the receiving institution.  An “indirect” rollover is when the check is made payable to the participant, however, the rollover must occur within 60 days of the distribution
  4.  Pretax and after tax assets may be rolled over to a Roth IRA.  All pretax money is taxable in the year of the rollover.
  5.  If you rollover retirement plan assets prior to January 1, 2010, you must have a modified adjusted gross income of $100,000 or less, and if married you must be filing joint income tax returns.
  6. For inherited qualified retirement plans, a spouse can rollover the plan assets to his/her own Roth IRA or an inherited Roth IRA.  Non-spouses who inherit retirement plan assets, can only rollover to an inherited Roth IRA and it must be a “direct” rollover.

A rollover to a Roth IRA may be worth considering for you because qualified distributions from Roth IRA are tax-free and penalty-free.  Be sure to check with your plan administrator to determine whether you qualify for a Roth IRA conversion.

 

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