When did prohibition on rollover of basis to IRA change?

Submitted by John Peterson on Tue, 2015-12-08 16:50

In the olden days you could not rollover traditional after-tax basis amounts from a qualified plan to a traditional IRA.

When did that rule change?

Thanks



Submitted by Alan - IRA critic on Tue, 2015-12-08 17:14

In 2002. It was part of the portability expansion included in EGTRRA, better known as the Bush tax cuts of 2001.

EGTRRA made several changes to distribution and rollover requirements.I would not cover this requirement as it is not effective until DOL issuesfinal regs.EGTRRA Sections 641 to 649 provide for various rollover and distributionprovisions for qualified plans, IRAs, IRC457 Plans, and IRC403(b) plans.Account balances in an IRC457 plan can be transferred to and fromanother Plan, or to an IRA, in a trust to trust transfer, as long as separateaccounting of the amount transferred is maintained. The rollover will comeunder the requirements of IRC401(a)(31), e.g. a trust to trust transfer of aneligible rollover to an eligible plan. These provisions have also beenextended to IRC403(b) plans, see section 641 of EGTRRA. Thesechanges are effective for distributions after December 31, 2001. Section643 allows for rollovers of after-tax contributions, thus protecting theirearnings from taxation, in an IRC401(a)(31) eligible rollover to an IRA or401(a) defined contribution plan that accept such roll-overs. SurvivingSpouses will be able to rollover their account balance to an IRA, a 403(b),a 457, or a 401(a) plan that accepts such rollovers. EGTRRA permits theSecretary to waive the requirement that distributions be redeposited into aplan or an IRA within 60 days, in certain limited circumstances. Finally,qualified plans, 403(b), and 457 plans can accept rollovers from IRAsunder certain circumstances.

Submitted by Ben Meyer on Thu, 2015-12-10 15:41

Was this also the change that updated the method of determining the RMD using the Uniform Life Table (except for spouse as sole beneficiary if >10 years younger)?  I recall that determination of the RMD was fairly complex many years back, and was subject to change depending on the beneficiary selected.

Submitted by Alan - IRA critic on Thu, 2015-12-10 19:55

Yes, Benn. It also reduced RMDs by reflecting the latest mortality data. Therefore, in the next couple of years the tables should be revised again to marginally reduce RMDs . 1986 tables, then 2001, then ?

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