Multiple Rollovers?
Client has a 457 plan and a TIRA. He wants to set up a new TIRA at another custodian and roll the two existing accounts into the new one. He then wants to convert this new TIRA to a Roth. Any problems with this sequence?
Client has a 457 plan and a TIRA. He wants to set up a new TIRA at another custodian and roll the two existing accounts into the new one. He then wants to convert this new TIRA to a Roth. Any problems with this sequence?
Permalink Submitted by Jeffrey Moss on Mon, 2010-06-14 17:58
Based on my research, the trustee to trustee transfer of the existing TIRA is not a rollover. It appears the transfer of the 457 to the new IRA is [u]also not[/u] a rollover.
Permalink Submitted by Alan Spross on Mon, 2010-06-14 21:38
I agree. The issue is apparently avoiding violation of the one rollover per 12 month period per IRA account.
Breaking this down further:
1) The direct or indirect rollover of the 457 to the TIRA does not count since the one rollover rule only applies to rollovers FROM an IRA, not TO an IRA.
2) The Roth conversion also does not count as a rollover, whether done directly or indirectly.
3) The TIRA to TIRA transfer is the only transaction that counts, and only if done as an indirect rollover.
Therefore, as long as the TIRA to TIRA rollover is the ONLY such indirect rollover for the 12 month period before and after, there is no problem with the 3 transactions. But if the first TIRA had either received or distributed an indirect rollover in the prior 12 months, this second indirect rollover would be a violation. There would also be a violation if there had been no prior indirect rollovers but within the following 12 months, an indirect rollover was made from the new TIRA account. For this reason, it is advised to use a direct transfer for the current transaction as well and not to exhaust the one rollover allowed. It keeps that option available for the future.
Permalink Submitted by Jeffrey Moss on Tue, 2010-06-15 17:52
Thanks Alan. The whole idea is to end up with one Roth. Taxpayer will most likely have an NOL this year which makes the timing perfect. Also, there is no [u]need[/u] to ever take distributions. At some point in the next couple of years, they will be back in the top bracket so this is a no-brainer.