529 to Roth IRA “rollover”

Submitted by Sten Lindquist on Wed, 2023-09-06 14:57

The 529 to Roth “rollover” provision is effective for distributions beginning in 2024 but could an individual have the Roth contribution coded as a 2023 contribution by April 15th?



Submitted by Alan - IRA critic on Wed, 2023-09-06 18:57

  • This Section of 2.0 lacks considerable detail that will be left to the IRS to determine. I would think that this transfer is basically is a qualified rollover contribution and therefore the “tax year” referred to in the legislation is the tax year in which the transfer is completed. Yet, regular Roth IRA contribution limits are applied to limit the amount of the transfer and the IRS will have to come up with revised 5498 reporting requirements for Roth custodians in order to expose any excess Roth contributions. As such, these transactions will be a form of  hybrid contribution to the Roth IRA.
  • While your question pertains to 2023, it will also apply to every year thereafter, and the IRS will probably put to rest any ability to apply the rollover contribution as a form of a “prior year” Roth contribution.
  • I would be surprised if this provision will be ready for 2024 implementation. The IRS would have to resolve all these questions, publish guidance, and provide the lead time needed for both 529 plans and Roth custodians to change their reporting system requirements. If such guidance is not provided by the end of this month, it will probably be too late to implement in 2024.

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