Secure Act 2.0 question

Submitted by Kevin O'Hearn on Tue, 2023-07-18 20:52

Hello,

Under SECURE Act 2.0, it is now permitted to roll 529 assets to a Roth IRA starting in 2024.

Assuming someone qualifies for this rollover, would it be possible for them to take a $13,000 distribution from a 529 on 1/5/2024 and roll $6,500 to a Roth IRA as a prior year 2023 contribution and also roll $6,500 to the same Roth IRA as a 2024 contribution?

Or because this is not permitted until 2024, would only a 2024 contribution be allowable using 529 funds?

Any help would be greatly appreciated. Thank you.



Submitted by Alan - IRA critic on Wed, 2023-07-19 02:57

  • This Secure 2.0 provision was poorly drafted and will be subject to multiple issues being defined by IRS guidance. Due to the complexity of this provision and required coordination between 529 plans and Roth custodians, it looks increasingly unlikely that this provision will be ready for implementation in 2024.
  • Such a “qualified rollover contribution” could not be applied to a year prior to the year this provision becomes ready for implementation. It also appears that as a rollover contribution and not a regular Roth contribution the contribution will only be applied to the actual year of the transfer even after the implementation. And the plan beneficiary will need to have earned income to support the qualified rollover contribution. Therefore, some hydrid requirements will apply. Again, this issue will be subject to pending IRS guidance.

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