In-Plan Roth Rollover Guidance
IRS In-Plan Roth Rollover Guidance on Implementation and Taxation Rules
In-plan Roth rollovers were part of the Small Business Jobs Act of 2010 ("SBJA"). SunGard Relius has posted implementation and taxation rule guidance that answers some frequently asked questions about this new rollover option.
Implementation
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here for answers to the following questions on IRS in-plan rollover guidance on implementation:
- What is an in-plan Roth rollover?
- What amounts are eligible for an in-plan Roth rollover?
- Notwithstanding the extension to amend a 401(k) plan to permit in-plan Roth rollovers (see Q & As 4 through 7), must the employer have the Roth deferral feature in place at the time of an in-plan Roth rollover contribution?
- If an employer wishes to permit in-plan Roth rollovers for 2010, must the employer sign the amendment before the end of the 2010 plan year?
- Does the extended amendment deadline also apply to an amendment to permit Roth deferrals in an existing 401(k) plan, or to permit the acceptance of rollover contributions by the Roth deferral account (including an in-service distribution provision)?
- Does the extended amendment deadline apply to a plan amendment creating a general in-service distribution provision (i.e., not limited to in-service distributions for the sole purpose of an in-plan Roth rollover, or perhaps for in-plan Roth rollovers plus withholding to pay the tax on the rollover)?
- Does the extended amendment deadline also apply to a safe harbor 401(k) plan (either "traditional" or "QACA")?
- Must a married participant obtain spousal consent in order to make a direct rollover to an in-plan Roth account?
- Can an in-plan Roth direct rollover cause a participant to lose a protected distribution option?
- May a spousal death beneficiary or an alternate payee spouse (or former spouse) elect an in-plan Roth rollover?
- May a non-spouse death beneficiary elect an in-plan Roth rollover?
- What is the amendment deadline for in-plan Roth rollovers in a 403(b) plan?
Taxation Rules
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here for answers to the following questions on IRS in-plan rollover guidance on taxation:
- What are the tax consequences of making an in-plan Roth rollover?
- In what year does the participant pay the tax?
- How does the participant make a 2010 income inclusion election for a 2010 in-plan Roth rollover?
- Is the in-plan Roth rollover subject to 20% automatic withholding?
- Is the rollover subject to the 10% early distribution penalty of Code 72(t)?
- What amount is included in income when a participant receives a distribution from an in-plan Roth rollover account?
- What is the difference between an in-plan Roth rollover account and a designated Roth account?
- Does the in-plan Roth rollover account share the same 5-year "clock" with the Roth deferral account for purposes of determining if a distribution is a qualified distribution?
- What recapture rule applies to a participant who receives a distribution of an in-plan Roth rollover within 5 years?
- Are there special rules if a participant takes a distribution from an in-plan Roth rollover account in 2010 or 2011?
- How does the plan determine if a Roth distribution comes from an in-plan Roth rollover account for purposes of the rules in Q&A- 9 and Q&A-10?
- If a participant has made multiple in-plan Roth rollovers, how does a plan determine which rollover is the source of funds for a distribution for purposes of the recapture rule in Q&A-9?
- How does a plan report an in-plan Roth rollover?
- Is there a difference in reporting the rollover if the participant spreads the tax over two years?
- How does the plan report a distribution from an in-plan Roth rollover account in 2010?
Please
contact us with questions about in-plan Roth rollovers and how the IRS guidance applies to specific situations.