Internal Revenue Service released
proposed rules and accompanying
guidance that eases the ability of plan participants to transfer
after-tax savings from their retirement plans to Roth IRAs.
proposed regulations (REG-105739-11, RIN 1545-BK08), issued Sept. 18, would
apply to distributions made after Jan. 1, 2015. However, participants may rely
on these proposed rules starting now, the guidance said.
Dold, of Groom Law Group Chartered in Washington, told Bloomberg BNA in an
e-mail that “this IRS relief should be well received by plan sponsors and
participants, and largely aligns with existing practice—allowing participants
to roll over pre-tax amounts to a traditional IRA or qualified plan (and
continue to defer), while permitting cash distributions of after-tax amounts
tax-free to participants (or rolled to a Roth IRA). This avoids the
complexities of a pro rata allocation approach that was first described in the
sample IRS rollover notice.”
proposed rules were issued in conjunction with Notice 2014-54, which permits
participants to direct from a retirement plan after-tax and pretax amounts that
are simultaneously disbursed to multiple destinations so as to allocate them to
specific destinations, without requiring pro rata treatment.
will be able to direct these allocations in connection with disbursements that
are directly rolled over, not only in connection with 60-day rollovers after
receiving a distribution, the guidance said.
The proposed rules were published in the Federal Register on Sept. 19 (79 Fed. Reg. 56,310, 9/19/14). Comments and requests for a public hearing on the guidance must be received by Dec. 18.
Excerpted from a story that ran in Pension & Benefits Daily (9/18/2014).
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