“Where is the rollover and conversion market?”
Just about everywhere.
There are very few clients who don’t have some qualified account somewhere, whether it’s an individual retirement account, 401(k), or something else. So, asking customers about this can potentially uncover business opportunities.
Furthermore, with recent positive changes in the law, particularly with the conversion opportunity to Roth IRAs in 2010, rollovers and conversions deserve special focus for the next few years.
First, here are some reasons why it makes good sense to roll over IRAs to qualified plans, such as 401(a)/(k), 403(b), and 457(b) governmental plans.
Creditor protection/bankruptcy (for qualified plans 401(a)/(k) only): In creditor matters, qualified plan assets cannot be assigned or alienated (IRC Section 401(a)(13)). This is a powerful tool. Other than via Qualified Domestic Relations Orders and levies by the Internal Revenue Service, it’s very difficult for creditors to access qualified accounts.
For IRAs, general creditor protections vary by state and usually are not as good.
For bankruptcy, qualified plan assets are exempt from federal bankruptcy proceedings, while traditional and Roth IRA protection is only available up to $1 million. But for qualified plan (401(a)/(k)) assets placed into a rollover IRA, those assets do not have a $1 million cap and are fully exempt from bankruptcy as well (11 U.S.C. ? 522(d)(12)).
Participant loans: Qualified plan assets can be used for plan loans, which are not allowed in IRAs.
Life insurance: One can use qualified plan assets for larger life policy premiums, particularly in profit sharing plans where certain rules permit a larger portion of the assets for insurance premiums. (Example: More than two-year old money can be used 100% for insurance; 5-year plan participants can use 100% of plan assets for life insurance, etc.) However, life insurance is not allowed in IRAs.
Delay required minimum distributions (RMDs) for active workers and spouses in death distributions. For non-5% owners (i.e., they don’t own 5% or more of the business) in qualified plans and 403(b)s, RMDs aren’t required until the later of age 70 1/2 or actual retirement. But in IRAs (except Roth IRAs, where no minimums are required), RMDs must begin at 70 1/2 , even if the person is still working.