As noted in my blog yesterday, the Internal Revenue Service (“IRS”) provided guidance on in-plan Roth rollovers in Retirement News for Employers – Fall 2010 Edition, and in Notice 2010-84. An “in-plan Roth rollover” is a rollover, made after September 27, 2010, of a distribution from a non-Roth account in a 401(k) plan or 403(b) plan into a designated Roth account in the same plan. The guidance in the Retirement News was discussed yesterday. Here are some highlights of Notice 2010-84 (the “Notice”):
–The rollover may be accomplished by a direct rollover, or by the distribution of funds to the plan participant, who then rolls over the funds into his or her designated Roth account in the plan within 60 days.
–An amount is not eligible for an in-plan Roth rollover, unless it satisfies the rules for distribution under the Code and is an eligible rollover distribution as defined in Code section 402(c)(4). For example, in the case of a 401(k) plan participant who has not had a severance from employment, an in-plan Roth rollover from the participant’s pre-tax elective deferral account may be made only if the participant has reached age 59½, has died or become disabled, or receives a qualified reservist distribution as defined in Code section 72(t)(2)(G)(iii).
–If a plan loan is included in an in-plan Roth rollover, and the loan’s repayment schedule is not changed, the inclusion of the loan in the rollover does not result in a new loan (so the rule in § 1.72(p)-1, Q&A-20, of the Income Tax Regulations-which could result in tax if the loan were new and the Code section 72 limits were exceeded-does not apply).
–The Notice reminds us that, if the plan offers in-plan Roth rollovers, this feature must be described the plan’s 402(f) notice, and the Notice provides sample language which may be used for this purpose.
–The Notice reminds us that the plan must have a qualified Roth contribution program in place at the time the first in-plan Roth rollover is made.
–The Notice provides details on the deadlines for amending the plan to permit in-plan Roth rollovers.