Definition
A qualified rollover contribution is a Roth IRA conversion.
The following transactions are qualified rollover contributions:
1.A rollover contribution from a traditional IRA, SEP IRA or SIMPLE IRA to a Roth IRA, and
2.A rollover contribution from a qualified plan, 403(b) account, 403(a) annuity, or governmental 457(b) plan to a Roth IRA
Under Number 1, the following applies[1]:
- If the amount was paid (distributed) to the Roth IRA onwer, the amount is credited to the Roth IRA within 60-days of the Roth IRA owner receiving the assets. If the transaction is done as a direct conversion, the 60-day limit is a non-issue.
- The distribution is not made from an inherited IRA. Non-spouse beneficiaries cannot convert inherited traditional, SEP or SIMPLE IRAs to Roth IRAs
- The amount credited to the Roth IRA does not include the individual’s RMD for the year that the conversion occurs. If the individual is subject to the RMD rules, the RMD must be withdrawn before the conversion occurs.
- If the delivering IRA is a SIMPLE IRA, it must have been at least two years since the first contribution was deposited to the SIMPLE IRA, and
- The amount is rollover eligible
Under number 2, the following applies[2]:
- If the amount was paid ( distributed) to the Roth IRA owner, the amount distributed is credited to the Roth IRA within 60-days of the Roth IRA owner receiving the assets. If the transaction is done as a direct rollover, the 60-day limit is a non-issue.
- The amount credited to the Roth IRA does not include the individual’s RMD for the year that the conversion occurs. If the individual is subject to the RMD rules, the RMD must be withdrawn before the conversion occurs.
- The amount is rollover eligible
Referring Cite
IRC §408A(e)
Additional Helpful Information
- A qualified rollover contribution is a reportable transaction. And except for amounts representing a return of basis (nontaxable amounts) the transaction is taxable.
- The transaction is not subject to the early distribution penalty, regardless of the individual’s age at the time the transaction occurs.
- Non-spouse beneficiaries are permitted to complete direct qualified rollover contributions from a qualified plan, 403(b) account, 403(a) annuity, or governmental 457(b) plan to an Inherited Roth IRA.
