Starting in 2015, there have been two changes in the tax law regarding certain distributions from employer qualified retirement plans and from Individual Retirement Accounts (IRA).

The first change is that an individual will be limited to one tax-free IRA rollover in any one year period.  The old law was that an individual was limited to one IRA rollover, per individual IRA account, for any one year period.  For individuals who have multiple IRA accounts, this will now restrict the total number of IRA rollovers for the one year period.

Please note that a trustee-to-transfer transfer of IRA monies to another IRA account (whereby the IRA owner never has possession of the funds transferred) is not considered to be an IRA rollover.  In addition, a taxable conversion of a traditional IRA account to a Roth IRA account is not an IRA rollover. Finally, any distribution from or to an employer qualified retirement plan is not an IRA rollover.  A tax-free IRA rollover only occurs when an individual takes money out of their IRA (normally the trustee will withhold 20% for taxes) and then redeposits 100% of the monies into an IRA account within 60 days.

Secondly, individuals with employer qualified retirement plans will now be able to roll over, tax free, both their before-tax and their after-tax contributions to separate IRA accounts.  The individual will be able to roll over before-tax contributions to a traditional IRA account and after-tax contributions to a Roth IRA account.  Under pre-2015 laws, an individual who had both before-tax and after-tax contributions in their employer retirement account, and rolled over a distribution to multiple IRA accounts, could not allocate their before-tax contributions and their after-tax contributions to the separate IRA accounts, and had to pay taxes on some of the distributions as a result.

If you have the need to make an IRA rollover, or want to roll over your employer qualified retirement plan into multiple IRA accounts, we can help you navigate through these confusing IRS regulations.  Please contact Andrew Ross, CPA at Bedard, Kurowicki & Co., CPA’s at (908) 782-7900 or adr@bkc-cpa.com.