Worker, Retiree and Employer Recovery Act
This is concerning H.R. 7327 – Worker, Retiree, and Employer Act of 2008
While I thought I understood the provisions within the ‘Act’ – I have a client who has an RIA soliciting his business, that is telling him that he is eligible (being a retired Delta Airlines Pilot) to “Fund Your Roth IRA from your Traditional IRA – No Taxes No Penalties”- So in essence, what this solicitation is stating is, he can convert his existing Traditional IRA account to a Roth IRA account without any taxes or penalties…That just doesnt seem correct at all. I have looked at the act passed and cant find anywhere in there where it states that this is the case…
Can anyone help on this ??
Thank you –
Gregg Guiol
Permalink Submitted by Alan Spross on Tue, 2009-06-16 22:59
Gregg,
The client cannot fund a Roth from a TIRA under this particular provision.
These qualified airline payments have been issued in recent years and have already been taxed. Therefore, they are currently post tax amounts, and what Sec 125 of the WRERA authorizes is a rollover, essentially a tax free conversion of these amounts to a Roth IRA. The amounts currently would not be part of a TIRA or other tax deferred account. There is also no modified AGI limit in completing this rollover, but for some payments received over 180 days ago, the deadline is imminent to complete this rollover to a Roth IRA. A brief summary of the provision is contained in Pub 590 on p 66. However, the attached link will provide some further details on this opportunity:
http://www.phhinvestments.com/welcome/wel_recovery_act.html
Permalink Submitted by Gregg Guiol on Wed, 2009-06-17 14:37
Alan –
As always your input is most helpful…
Gregg Guiol