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Case of the Week: IRA One-Rollover Rule

The ERISA consultants at the Columbia Management Retirement Learning Center Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs and qualified retirement plans. A recent call with a financial advisor in North Carolina is representative of a common question related to rollovers between traditional IRAs. The advisor asked:  

Is it true that, beginning in 2015, and IRA owner may only move his or her IRA to a new trustee, custodian or issuer one time per year?

Highlights of Discussion

  • The answer depends on the method of movement. Only 60-day rollovers are limited as of 2015.
  • Beginning Jan. 1, 2015, pursuant to new guidance in IRS Announcement 2014-15, an IRA owner may make only one 60-day rollover from a traditional IRA to another (or the same) traditional IRA in any 12-month period, regardless of the number of traditional IRAs the individual may own. If an IRA owner were to complete a second 60-day rollover during the same 12-month period, the IRA owner would create and excess contribution — potentially subject to taxation and penalization if not timely corrected. 

  • This same limitation, effective in 2015, applies to Roth IRA-to-Roth IRA 60-day rollovers.

Several things will not change as of 2015:

  • IRA-to-IRA transfers will remain unlimited. A traditional IRA owner may continue to make as many trustee-to-trustee transfers between IRAs as he or she may want. 
  • Likewise, traditional IRA owners may also continue to make as many traditional IRA- to-Roth IRA conversions as they may want.
  • The one-rollover-per-12-month-rule does not apply to rollovers between an IRA and a qualified retirement plan (e.g., 401(k), profit sharing, defined benefit, 403(b) plan, etc.) or vice versa.

The 2015 change in the interpretation of the one-rollover-per-12-month rule came as a result of a 2014 tax court ruling in Bobrow v. Commissioner, T.C. Memo 2014-21.  In this case, the court held the one-rollover-per-12-month rule applies on an aggregate basis — meaning regardless of whether an IRA owner has one or multiple traditional IRAs, he or she may only complete one 60-day rollover among them in a 12-month period. 

Through 2014, following current IRS guidance in Prop. Reg. 1.408-4(b)(4)(ii) and IRS Publication 590, IRA owners, IRA service providers and industry professionals will continue to apply the one-rollover-per-12-month rule separately to each IRA that an individual owns. 

Conclusion

Beginning in 2015, owners of IRAs will no longer be able to complete more than one 60-day rollover in a 12-month period, regardless of the number of IRAs they own.  Trustee-to-trustee transfers between IRAs will remain unlimited, as well as Roth IRA conversions, however.

The Columbia Management Retirement Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC, a third-party industry consultant that is not affiliated with Columbia Management. For informational purposes only. Please consult a tax advisor or attorney for specific tax or legal needs. © 2014 Columbia Management Investment Advisers, LLC. Used with permission.

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