ERISA consultants on the 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 California is representative of a common question related the one-rollover-per-12-month rule. The advisor asked:
“My client just rolled over his 401(k) plan to an IRA. Is he prohibited from doing another rollover this year under the new rule?”
Highlights of Discussion
- 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 (Announcement 2014-32).
- Beginning January 1, 2015, an IRA owner may only make 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.
- This same limitation also applies to Roth IRA-to-Roth IRA 60-day rollovers.
- If an IRA owner were to complete a second 60-day rollover during the same 12-month period, the IRA owner would create an excess contribution, which is potentially subject to taxation and penalization if not corrected.
- IRA-to-IRA transfers will remain unlimited. A traditional IRA owner may continue to make multiple trustee-to-trustee transfers between IRAs penalty free.
- Likewise, traditional IRA owners may continue to make as many traditional IRA-to-Roth IRA conversions as they may want.
Conclusion
Beginning in 2015, IRA owners 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. 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 Learning Center Resource Desk is staffed by the Retirement Learning Center, LLC (RLC), a third-party industry consultant that is not affiliated with Columbia Threadneedle. Any information provided is for informational purposes only. It cannot be used for the purposes of avoiding penalties and taxes. Columbia Threadneedle does not provide tax or legal advice. Consumers consult with their tax advisor or attorney regarding their specific situation.
Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Columbia Threadneedle.
Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies.
© 2015 Columbia Management Investment Advisers, LLC. Used with permission.
