1. What is a charitable IRA rollover or qualified charitable distribution?
A taxpayer age 70½ or older is permitted to make a qualified charitable distribution (QCD) from a traditional IRA or Roth IRA that is not includable in the gross income of the taxpayer. The exclusion for qualified charitable distributions generally is available for distributions from any type of IRA (including a Roth IRA and a deemed IRA) that is neither an ongoing SEP IRA nor an ongoing SIMPLE IRA.
2. May an individual who has turned 70½ make a rollover?
Editor’s Note: The Secure Act now permits taxpayers to make contributions to traditional IRAs at any age.
Although there was considerable confusion on this issue at one time, it now seems clear that rollovers may be made to traditional IRAs as long as the minimum distribution requirements are met. Rollovers, as well as contributions, may be made to Roth IRAs by individuals at any age. It appears that the same rationale also permits rollovers to qualified plans and Section 403(b) tax-sheltered annuities after age 72 if minimum distribution requirements are met.
3. Can a required minimum distribution (RMD) from an IRA be rolled over into another account?
A required minimum distribution from an IRA is not eligible for rollover. If a minimum distribution is required for a calendar year, any amounts distributed during a calendar year from an IRA are first treated as the RMD for the year.
4. May a surviving spouse make a rollover contribution?
Yes. Where any portion of an eligible distribution from a qualified plan is paid to the spouse of a participant after that participant’s death, the spouse may make a rollover contribution of all or any part of that portion within 60 days of receipt. The IRS is authorized to waive the 60-day rule under certain circumstances.
5. May a surviving non-spouse beneficiary make a rollover contribution?
Yes. Beginning for distributions in 2008, a non-spouse designated beneficiary of a qualified plan, a tax-sheltered annuity, or an eligible 457 plan may make a direct rollover into an inherited IRA, including a Roth IRA. The rollover must be made by trustee-to-trustee transfer. The transfer will be treated as an eligible rollover distribution. Distributions to non-spouse beneficiaries before 2008 were not eligible rollover distributions.
6. May a recipient of a distribution roll over the amount into another person’s individual retirement plan?
No. Where a plan participant received a distribution from a qualified retirement plan and, within 60 days, the funds were placed in a traditional IRA held in the participant’s wife’s name only, but not pursuant to a valid qualified domestic relations order (QDRO), the Tax Court found that a valid rollover had not occurred.
7. May an individual who is not a participant in a qualified plan roll over amounts received from the plan because of a divorce or separation agreement?
Yes, if the agreement is a qualified domestic relations order and certain requirements are met. A QDRO is a decree or judgment under state domestic relations law that recognizes or creates the right of a spouse or child to receive, or to have set aside, a portion of a participant’s interest in a qualified plan, 403(b) plan, or eligible Section 457 governmental plan.
8. What new rules apply to allow a taxpayer to roll over pretax and after-tax contributions in a qualified plan into separate accounts in a single distribution?
Notice 2014-54 allows a distribution from an employer-sponsored retirement account to be treated as a single distribution even if it contains both pre-tax and after-tax contributions, and even if those contributions are rolled over into separate accounts, so long as the amounts are scheduled to be distributed at the same time. The guidance now allows the taxpayer to allocate pre-tax and after-tax contributions among different types of accounts in order to maximize their future earnings potential—avoiding the pro-rata tax treatment.
9. Must a participant receiving an eligible rollover distribution have the option of making a direct rollover to another qualified plan?
Yes. A qualified plan, a Section 403(b) tax-sheltered annuity, and an eligible Section 457 governmental plan must provide that participant the option to have the distribution transferred in the form of a direct rollover to another eligible retirement plan. This direct rollover option generally must be provided to any participant receiving a distribution.
10. What notice requirements must a plan satisfy if it is subject to the direct rollover rules?
A plan administrator, within a reasonable time before a distribution is made, must provide the recipient of the distribution with a written explanation of the options available for transferring the funds. The explanation must include the provisions under which the recipient may have the funds transferred by means of a direct rollover and under which circumstances the income tax withholding requirements will apply.
Where applicable, the notice must explain that the automatic rollover rules apply to certain distributions. With respect to qualified plans and eligible 457 plans, the notice generally must be given no fewer than 30 days and no more than 90 days before the date of distribution.
11. May a participant who receives a distribution of an annuity from a qualified pension or profit-sharing plan surrender the annuity and roll over the proceeds?
The annuity contract or cash amount received on surrender of the contract may be rolled over if the distribution is an eligible rollover distribution and meets the requirements necessary for rollover of such a distribution. For purposes of the 60-day rule, the distribution takes place on distribution of the annuity contract from the plan, not on its surrender or transfer to the receiving plan.
12. When may rollover contributions be made from an IRA to a tax-sheltered annuity?
An individual may receive a distribution from his or her traditional IRA and within 60 days roll it over into a tax-sheltered annuity to the extent that the distribution would be includable in income if not rolled over. After-tax contributions, including nondeductible contributions to a traditional IRA, may not be rolled over from a traditional IRA into a Section 403(b) tax-sheltered annuity.
13. When may rollover contributions be made from an IRA to a 457 plan?
An individual may receive a distribution from his or her traditional IRA and within 60 days roll it over into an eligible Section 457 governmental plan to the extent that the distribution would be includable in income if not rolled over. The 457 plan must agree to separately account for the funds. After-tax contributions including nondeductible contributions to a traditional IRA may not be rolled over from a traditional IRA into an eligible 457 plan.
14. May a taxpayer roll over amounts from a defined contribution plan into a defined benefit plan? What special rules apply to the rolled-over funds?
Yes. The Pension Benefit Guaranty Corp. has issued rules that are designed to encourage taxpayers to roll amounts from defined contribution plans into defined benefit plans by clarifying the protection that these funds would receive should the defined benefit plan be terminated and become subject to PBGC control.