Although distributions from a Roth 401(k) or Roth 403(b) account have always been eligible for rollover into a Roth IRA (in two steps–by first rolling the distribution over into a traditional IRA, and then converting the traditional IRA to a Roth IRA), the Pension Protection Act of 2006 now (in 2008) allows employees participating in traditional (non-Roth) qualified plans (e.g., 401(k), 403(b), governmental 457(b)) to rollover directly into a Roth IRA for distributions received after December 31, 2007.
Only direct (trustee to trustee) rollovers qualify (e.g., 60-day indirect rollovers do not).
Generally, the same rules apply to these rollovers as do to conversions of traditional IRAs to Roth IRAs (rollover includible in gross income (except after-tax contributions), and no 10% early distribution tax).
Taxpayers with AGI of at least $100,000 or who are married filing separately, are not eligible for this direct rollover to a Roth. These limitations were repealed by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), but not until 2010.
For professional investment advice on this topic contact:
Allgen Financial Services, Inc.
888.6ALLGEN (888) 625-5436
advisors@allgenfinancial.com
www.allgenfinancial.com
