New In-Plan Roth Rollover Provision

A provision in the recently enacted American Taxpayer Relief Act of 2012 permits an individual to transfer any portion of their balance in an employer-sponsored tax- deferred retirement plan account into a Roth IRA account under that plan. This transfer option for retirement plans is only available if the employer plan includes this feature (i.e., in-plan Roth) in the plan. Prior to the Act, only eligible retirement plan distributions could be rolled over to an in-plan Roth IRA.

The catch under the new Roth transfer provision is that the transfer will be fully taxed, assuming the conversion is being made with pretax dollars (money that wasn’t taxed to an employee when contributed to the qualified employer-sponsored retirement plan). The taxable amount will also include any earnings on those pretax dollars.

The provision is effective for post-2012 transfers, in tax years ending after December 31, 2012. Conditions and restrictions apply.

Please contact Martini, Iosue & Akpovi by phone at (818) 789-1179 if you have questions or want more information.


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