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IRS Posts Roth Rollover Advice

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The Internal Revenue Service is weighing in on when employer-plan-to-Roth rollovers should or should not be included in a participant’s taxable income.

The guidance, given in IRS Notice 2009-75, answers one question about rollovers from 401(a) plans, 403(a) annuity plans, 403(b) retirement plans or governmental 457(b) retirement plans into Roth individual retirement accounts.

If the assets started out in an ordinary account, rather than a Roth account, then “the amount that would be includible in gross income were it not part of a qualified rollover contribution is included in the distributee’s gross income for the year of the distribution,” IRS officials write in the notice.

If the assets started out in a Roth account inside a retirement plan, “the amount rolled over is not includible in the distributee’s gross income, whether or not the distribution is a qualified distribution from the designated Roth account,” officials write.

Officials also discuss the effects of income limitations and joint filing requirements on plan-to-Roth rollovers.