I rollover per year rule
Ed Slott’s book, “The Retirement SavingsTime Bomb” states on page 40 that you can do as many trustee-to-trustee transfers a year as you like, but rollovers are limited to one every 12 months. I am told this is misleading due to one important exception. If you are direct transferring money from a 401k or other company plan to an IRA, the IRS always considers it a distribution. Even if it is a trustee-to-trustee transfer, it is treated like a rollover, a 10099R is required to be generated, and it can be made only once in 12 month period. Which is correct and is it covered somewhere in the book?
Permalink Submitted by Alan Spross on Sat, 2011-02-26 19:36
You are correct regarding how an employer plan transfer to an IRA must be reported. However, the one rollover limit per year applies to distributions from IRA accounts that are rolled over to other IRA accounts. Therefore, there is no limit on the number of rollovers that can be made FROM an employer plan to an IRA account or from an IRA account to an employer plan other than an IRA.
Conversions to a Roth IRA are another exception that does not count against the one rollover rule even though a conversion is an IRA to IRA rollover when done indirectly (60 day rollover). Recharacterizations do not count either since they must always be done by direct transfer.
Permalink Submitted by Ed Farmer on Wed, 2013-03-06 21:09
Do I undertand correctly, a person may convert an unlimited number of Traditional IRA’s to ROTH IRA’s AND ignore the 12 month rule which generally limits IRA Rollovers to once every 12 months? Example: Mr. Smith has 4 Traditional IRA’s & he wants to convert all 4 Traditional IRA’s to ROTH IRA’s–he could convert all 4 in one 12 month period? He would not need to wait & convert 1 at a time, each in a differnet 12 month period?
Permalink Submitted by Alan - IRA critic on Wed, 2013-03-06 21:56
No need to wait. Roth conversions are exempt from the one rollover rule, so multiple conversions could be done from the same IRA account. Recharacterization are also exempt since they can only be done by direct transfer. But there is a waiting period to reconvert a recharacterized conversion. It’s similar to the one rollover rule but is measured differently.
Permalink Submitted by Dan Everitt on Tue, 2013-10-08 01:36
If I rolled out funds from a 401K to a rollover IRA. Can I do as many direct transfers to other IRAs as I want in a year?
Permalink Submitted by Alan - IRA critic on Tue, 2013-10-08 01:53
Yes, direct transfers are unlimited in number, and so are distributions rolled from a 401k to an IRA. The one rollover limit only applies to IRA to IRA indirect rollovers.