Life and Death Planning for Retirement Benefits

Chapter 5: Roth Retirement Plans

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One way to fund a Roth IRA is by making what the IRS calls “regular” (as opposed to “rollover”; ¶ 5.4) contributions to it. This section discusses the requirements for making a regular contribution to a Roth IRA, as contrasted with the rules governing regular contributions to a traditional IRA. See ¶ 2.1.08 and ¶ 5.6.01 for how to change your mind about your IRA or Roth IRA contribution after you’ve already contributed. As with traditional IRAs, only cash may be contributed. § 408A(a) , § 408(a)(1) . See ¶ 5.6.05 (A) regarding the deadline for making a regular Roth IRA contribution. The term “regular” Roth IRA contribution normally means a permissible annual- type contribution to the Roth IRA from compensation income, as described in this ¶ 5.3.02 . However, the regulations say that any contribution to a Roth IRA that is not a qualified rollover contribution is a “regular contribution.” Reg. § 1.408A-3 , A-1. So certain contributions that are intended to be rollovers or Roth conversions, but don’t meet the rollover requirements, such as a “failed conversion” ( ¶ 5.4.06 ) or the attempted rollover of an RMD (¶ 5.2.02 (E)), would be categorized as “regular” Roth IRA contributions. A so-called regular contribution arising out of a failed conversion will typically be an excess contribution ( ¶ 5.3.05 ). Adding to the confusion, a proper and legal tax-free rollover from a DRAC to a Roth IRA is treated as a “regular contribution” to the Roth IRA for purposes of applying the Ordering Rules (¶ 5.7.08 (C)). An individual must have compensation income in order to be eligible to make a regular contribution to either a traditional or a Roth IRA. Reg. § 1.408A-3 , A-3. The individual’s contributions to either type of IRA for a particular year may not exceed the amount of such individual’s compensation income for such year (or, if less, the dollar limit described in ¶ 5.3.03 ). An individual who does not have compensation income, or whose compensation income is not high enough to support the full maximum contribution to an IRA, but whose spouse does have sufficient compensation income, can (if otherwise eligible) make a regular contribution to an IRA or Roth IRA based on the “working” spouse’s income. § 219(c)(1)(B)(ii) . “ Compensation ” is partly defined in § 219(f)(1) . It includes self-employment income ( § 401(c)(2) ), and does not include pension, annuity, or deferred compensation payments. It includes taxable alimony and separate maintenance payments (§ 71). It includes (since 2004) nontaxable combat pay; see IRS Publication 590 (“IRAs”; 2009 ed., p. 8). It includes “wages, commissions, professional fees, tips, and other amounts received for personal services ....” Reg. § 1.408A-3 , A- 4. See Rev. Proc. 91-18, 1991-1 CB 522, for further detail. This brief summary of the amount that may be contributed as a “regular” contribution to an IRA or Roth IRA is included for convenience. For more detail (and annual updates) on the maximum IRA contribution, see IRS Publication 590, § 219 and related regulations, or Denise Appleby Quick Reference charts ( Appendix C ). The maximum annual regular Roth IRA contribution amount derives from the maximum annual regular traditional IRA contribution amount. The maximum amount that may be “Regular” Roth IRA Contributions: An Elastic Term Applicable Dollar Limit for regular contributions