Rollover IRA
It has been my understanding that an IRA that is designated as a rollover IRA is to allow for those funds to be rolled into a qualified plan as long as it isn’t commingled with other money. Since the overhaul of 2006 (I believe), we can now roll IRA funds into qualified plans even if it has never been held in a qualified plan. My broker-dealer’s IRA application has as check box to indicate if the new account is a rollover IRA. Is there any point in the rollover designation now?
Permalink Submitted by Alan - IRA critic on Tue, 2018-10-02 22:37
Yes, some employer plans only accept IRA rollovers from rollover IRAs, not from contributory IRA accounts. In addition, there are some states that protect IRA balances from creditors only through the terms of the 2005 Bankruptcy Act. Under that Act, rollover IRAs are protected without limit when filing BK in a qualified court, while other IRA balances are protected up to around 1.3mm, inflation adjusted every 3 years. Therefore, the likely balance of his IRAs is a factor, the split between rollover IRAs and contributary IRAs, and the level of creditor protection in his state or in states to which he might move in the future. Therefore, the two issues of portability and creditor protection still result in a rollover IRA account having advantages for some taxpayers.