Specific Guidance on In-Plan Roth Transfers

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12/16/2013
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In 2010, Congress allowed participants to make in-plan Roth rollovers (IRR) of amounts that were otherwise distributable in an eligible rollover distribution.  In 2013, Congress expanded the rule, allowing participant to make in-plan Roth transfers (IRT) of amounts that were not otherwise distributable.    

Wednesday, the IRS released Notice 2013-74 which gives guidance on IRT and IRR.  This is the second of three technical updates dealing with this Notice.  This technical update will focus on operational guidance related specifically to IRT. 

How does the Notice treat IRT?

Interestingly, the Notice never uses the phrase “in-plan Roth Transfer.”  Instead, the Notice expands the concept of IRR to include IRT.  So, what we are left with is in-plan Roth rollovers of otherwise distributable amounts (effective in 2010) and in-plan Roth rollovers of otherwise nondistributable amounts (IRT, effective in 2013). 

The convenience of this approach is that it immediately answers most of the questions about IRT.  Just apply the IRR rules that the IRS outlined in Notice 2010-84. 

What Notice 2010-84 rules do not apply to IRT (in-plan Roth rollovers of otherwise nondistributable amounts)?
·         There is no longer a requirement that the participant be eligible for a distribution
·         60-day rollover rules do not apply to IRT
·         IRT do not require a special tax notice 

Can participants make IRT for nonvested amounts? 

No. 

Must IRT preserve protected distribution options available to the participant prior to the transfer?

Yes. 

If IRT funds were subject to distribution restrictions prior to the transfer, are they still subject to the restriction after the transfer? 

Yes.  For example, suppose participants make IRT of ADP safe harbor contributions.  These funds were not available for hardship distributions before the transfer and are not available for hardship distributions after the transfer. 

Does mandatory or voluntary withholding apply to IRT?

No.  Because IRT amounts are not otherwise distributable, the participant cannot use the funds to fund income tax withholding.  The participant will likely need to use funds outside the plan to pay income taxes on the transfer. 

We will discuss this topic in great details in the just added Web seminar, A New Day for Roth Rollovers, presented on Monday, January 6, and again on Wednesday, January 15. We will also cover it in our Web seminar Keeping Current on December 17. See below for details.  

Sample Client Memorandum of Same-Gender Marriage.  We will provide a copy of a sample client memorandum on the impact of same-gender marriage on retirement plans to those who are subscribers of our free Pension Technical Update service by December 20, 2013. To sign up for the Pension Technical Update e-newsletter, go to: https://www.relius.net/Login/NewUser.aspx.

ERISA Forms – We include sample client letters, such as the same-gender marriage memorandum in our ERISA Forms. ERISA Forms includes approximately 500 up-to-date forms, checklists, sample VCP application, etc., go to: https://www.relius.net/Products/PPDLibrary.aspx.  

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Upcoming Web Seminars
Keeping Current: 2013 in Review, December 17, 2:00 p.m. ET
1099-R: An Ongoing Challenge 2013, December 19, 2:00 p.m. ET
A New Day for Roth Rollovers – just added, January 6, 2:00 p.m. ET (Encore presentation on January 15, 12 p.m. ET). Registration opens soon.
Don't Be Caught Short: Understanding Short Years, January 14, 12:00 p.m. ET
403(b) Plans: Understanding Universal Availability, January 21, 12:00 p.m. ET
401(k) Testing Techniques, January 28, 2:00 p.m. ET
ERPA Test Review Web Seminar, Part I – 2014 (3 parts), January 7-8-9, 2:00 p.m. ET each day
ERPA Test Review Web Seminar, Part II – 2014 (3 parts), January 14-15-16, 2:00 p.m. ET each day 

Fundamentals of 401(k) Plans – starts January 6, 2014 – 7-part Web seminar series – Titles of the 7 segments: eligibility and vesting; HCEs and the coverage test; ADP, ACP, catch-ups, 401(k) safe harbor; nondiscrimination, compensation, 415 limits; top-heavy testing and deductible contributions; controlled groups and participant loans; taxation and distribution, Roth. Registration is open. Bundled registration price is available. 

For program details about upcoming Web seminars, and to register online: http://www.relius.net/events/events.aspx?Web 

Orlando Advanced Pension Conference – February 5-7 – Register by 1/6/14 and Save $150.
Earn up to 19 hours of CE credits. Program details and register online here:
http://www.relius.net/Events/seminardetail.aspx?CID=26289  

Just for ERPAs Workshop – February 4, 2014 – Register Now
Earn up to 8 hours of ERPA credit, including 2 Ethics hours. Discounted registration fee is available for Orlando 2014 APC attendees. View the workshop details and register online here: http://www.relius.net/Events/seminardetail.aspx?EID=26409

January Half-day Seminars - free web seminar; multi-seminar and multi-attendee discounts!
SunGard is presenting two half-day seminars in January in various locations. For more information, go here: http://www.relius.net/Events/events.aspx?Seminar.

Top Ten Plan Designs for the Small Employer. Understanding how to design and implement the top plan designs will provide practitioners with the tools to design plans that maximize allocations for clients. 

Creative Plan Corrections. This seminar is filled with examples of both common and uncommon plan defects, and shows how an employer can creatively use the principles of EPCRS to make things right and to retain qualified status. 

Bonus! Multi-program, multi-attendee (from the same office) discounts available. Plus, attend both programs and get free access to the archived web seminar, Final Exiting Regulations: The Birth of the “Maybe Not” Notice.

Archived Web Seminars – Just Added
Focused Topic 11: Partial Termination and Plan Termination, December 2013
Visit us at www.relius.net/events/events.aspx?Archive and click on titles for details and to register online.