IRA

Do You Remember the New 2015 Rollover Rules?

February 27, 2015

Specific rules, like anything else in life, typically fall in the category of "out of sight, out of mind."

This is especially true for my one-year-old son, who seems to be going 100 mph, 100% of the time. But it obviously also applies to us in the financial industry, where we have to keep track of the ever-changing rules that guide us and our clients' decisions.

As I had mentioned in my two previous blogs (Update on IRA Indirect Rollover Rules: The IRS Has Spoken and Please Read Instructions Before Rolling IRAs), in 2014, the U.S. Tax Court (in Bobrow v. Commissioner) ruled that the indirect IRA-to-IRA rollover rule allowing one rollover per 12 months should be applied on an aggregate basis (looking at all of a particular taxpayer's IRAs). Since, at the time, this was different than the interpretation found in IRS Publication 590, the IRS then stated through IRS Announcement 2014-15 that "it will follow the interpretation of Section 408(d)(3)(B) in Bobrow," and followed that up later in 2014 with IRS Announcement 2014-32, which was intended to address certain concerns that had arisen since the release of IRS Announcement 2014-15. The following key points were addressed and clarified in this latest announcement:

  • Bobrow interpretation only applies on or after January 1, 2015: In other words, the Bobrow aggregation rule, which takes into account all distributions and rollovers among an individual's IRAs, will apply to distributions from different IRAs only if each of the distributions occurs after 2014. Thus, a distribution from an IRA received during 2014 that was properly rolled over (under the normal 60-day limit) to another IRA will not be taken into account for any distributions or rollovers during 2015 that involve any other IRAs owned by the same individual.
  • Roth conversions are not subject to the rule: This means that rollovers from a traditional IRA to a Roth IRA are not subject to Bobrow interpretation; however, a rollover between an individual's Roth IRAs would preclude a separate rollover within a one-year period between the individual's traditional IRAs, and vice versa.
  • Rollovers to or from a qualified plan and trustee-to-trustee transfers are not subject to the rule: Therefore, if your client has the option to request a rollover from a qualified plan or move his or her IRA via a trustee-to-trustee transfer, this will not count against the "one rollover per year." Keep in mind, however, that rollovers from SEP-IRAs and SIMPLE IRAs will count against the "one rollover per year."

In the end, some rules bear repeating, and I felt that one more reminder of this quite significant change wouldn't hurt, especially since it seems many of us have a life more similar to my one-year-old son, going 100 mph, 100% of the time. 


Attachments/Links:

Picture of Chad Goforth

Chad is currently an Attorney Consultant for the Corporate Law Department at Pacific Life. Previously, he was a Senior Retirement Strategies Consultant, bringing more than 13 years of industry experience to his role and providing technical insights to our sales team and registered representatives on a variety of issues including IRAs, qualified plans, annuities, and estate planning issues.

Pacific Life, its distributors, and respective representatives do not provide tax, accounting, or legal advice. Any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor or attorney.

Pacific Life is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products.

Pacific Life refers to Pacific Life Insurance Company and its affiliates, including Pacific Life & Annuity Company. Insurance products are issued by Pacific Life Insurance Company in all states except New York and in New York by Pacific Life & Annuity Company. Product availability and features may vary by state. Each insurance company is solely responsible for the financial obligations accruing under the products it issues. 

Variable insurance products are distributed by Pacific Select Distributors, LLC (member FINRA & SIPC), a subsidiary of Pacific Life Insurance Company (Newport Beach, CA) and an affiliate of Pacific Life & Annuity Company. Variable and fixed annuity products are available through licensed third parties.

No bank guarantee • Not a deposit • Not FDIC/NCUA insured • May lose value • Not insured by any federal government agency