Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

3. 457(b) plans maintained by a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State. § 408A(e) (first sentence), § 402(c)(8)(B)(v) , § 457(e)(1)(A) . This type of plan is called in this book a “governmental 457(b) plan.” Rollovers from a nongovernmental 457 plan ( § 457(e)(1)(B) ) to a Roth IRA are not permitted. See § 408A(e) , as amended by PPA ’06, § 824. This change rendered Reg. § 1.408A-4 , A- 5, obsolete. This ¶ 5.4.02 explains who is eligible to convert a plan or IRA to a Roth IRA, including the effects (or noneffects) of age (A), participation in other plans (B), prior conversions (C), filing status (D), and income (E). If a person converts a traditional IRA or plan to a Roth IRA but is not eligible to do so (for example, if he reconverts a traditional IRA to a Roth too soon after recharacterizing; see “C”), the result is a “failed conversion.” See ¶ 5.4.06 . Prior to 2010, a person could be ineligible to convert to a Roth based on his filing status (“D”) or income (“E”). A. Age: Under 59½, over 70½, or in between. Any IRA owner or plan participant can convert his traditional plan or IRA to a Roth IRA regardless of his age; you are never too young or too old to convert to a Roth IRA. However, if the participant is under age 59½, see ¶ 5.5 regarding how the 10 percent penalty on early distributions applies to certain post- conversion distributions. Also, an individual who is turning (or is past) age 70½ in the conversion year must take the RMD for that year before he can convert any money from the account to a Roth IRA; see ¶ 5.2.02 (E). C. Prior conversion. There is generally no limit on the number of times a participant can convert all or part of any traditional plan or IRA to a Roth IRA. A person who converts part of his traditional IRA to a Roth IRA is free at any later time (in the same or a later year) to convert more of the same or another plan or IRA to a Roth IRA. The only exception is a waiting period that applies to someone who has unconverted (recharacterized) and then wants to reconvert the same amount; see ¶ 5.6.07 . D. Filing status. For conversion of plan distributions made in 2010 and later years, there is no filing status test; anyone can convert regardless of his income tax filing status. For years prior to 2010, a person who used the filing status “married filing separately” could not do a Roth conversion. See the Special Report: Ancient History ( Appendix C ). E. Income limit. For conversion of plan distributions made in 2010 and later years, there is no income test; anyone can convert regardless of his income level. For distributions occurring in years prior to 2010, an individual was not eligible to convert if his modified adjusted gross income exceeded $100,000. For details, including how MAGI was Who may convert: age, plan participation, income, etc. B. Participation in other plan(s). An individual can convert his traditional plan or IRA to a Roth regardless of what other plan(s) he may be participating in that year.