Recharacterization of Rollovers Clarification

Submitted by Kevin O'Hearn on Wed, 2019-06-26 16:02

We recently came across some conflicting information in regards to the new Rule prohibiting the recharacterization of rollovers and roth conversions. We are in search of additional clarification of the prohibited the Rollover portion of the rule.

To put is simply: Are all types of rollovers prohibited from being recharacterized?

Example:

401(k) to IRA,
401(k) to Roth IRA,
Roth 401(k) to IRA,
Roth401(k) to Roth IRA

Are any of these rollover option eligible??

Please provide any insight you have. Thank you!



Submitted by Alan - IRA critic on Wed, 2019-06-26 16:30

  • Regular traditional and Roth IRA contributions are the only transactions that can be recharacterized. The transfer of pre tax retirement balances to any Roth account can no longer be recharacterized. With respect to your 4 questions, 401k to IRA was never allowed to be recharacterized, 401k to Roth IRA used to be but can no longer be recharacterized, Roth 401k to IRA has never been a permitted transaction, and Roth 401k to Roth IRA is an allowed rollover but has never been allowed to be recharacterized. 
  • Some rollovers can be reversed at a later date, but these are not recharacterizations. For example, if a 401k is rolled to a rollover IRA, later on that rollover IRA could be rolled back to an accepting 401k plan. However, any rollovers to a Roth IRA are all permanent, none can be reversed to a different type of account.

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