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5.4.04 Tax treatment of converting nonIRA plan to Roth IRA ................................................. 243 5.4.05 Income spreading for conversions in 1998 or 2010........................................................ 244 5.4.06 Failed conversions .......................................................................................................... 245 5.4.07 Mechanics of traditional IRA-to-Roth IRA conversions ................................................ 246 5.4.08 Mechanics of conversion from other traditional plans ................................................... 246 5.5 R OTH P LANS AND THE 10% P ENALTY F OR P RE -A GE 59½ D ISTRIBUTIONS ................... 247 5.5.01 Penalty applies to certain Roth plan distributions........................................................... 247 A. Qualified distribution .......................................................................................... 247 B. Nonqualified distribution from Roth IRA........................................................... 247 C. Nonqualified distribution from DRAC ............................................................... 247 D. Conversion followed by distribution within five years....................................... 248 5.5.02 Roth conversion prior to reaching age 59½ .................................................................... 248 A. Penalty does not apply to a Roth conversion ...................................................... 248 B. Penalty applies to certain distributions within five years after a conversion...... 248 C. Penalty applies to failed conversion ................................................................... 249 5.5.03 Conversion while receiving “series of equal payments” ................................................ 249 5.6 R ECHARACTERIZING AN IRA OR R OTH IRA C ONTRIBUTION ........................................ 250 5.6.01 Which IRA contributions may be recharacterized.......................................................... 250 5.6.02 Income attributable to the contribution........................................................................... 251 5.6.03 How to recharacterize certain IRA/Roth IRA contributions........................................... 252 5.6.04 Partial recharacterizations ............................................................................................... 253 5.6.05 Deadline for Roth IRA contributions and conversions................................................... 254 5.6.06 Recharacterization deadline: Due date “including extensions” ...................................... 255 5.6.07 Same-year and immediate reconversions banned ........................................................... 257 5.7 D ESIGNATED R OTH A CCOUNTS ........................................................................................ 257 5.7.01 Meet the DRAC: Roth 401(k)s, 403(b)s, 457(b)s........................................................... 257 5.7.02 DRAC contributions: Who, how much, how, etc. .......................................................... 258 A. Who may contribute............................................................................................ 258 B. How much may be contributed ........................................................................... 259 C. Election is irrevocable......................................................................................... 259 D. What may be contributed to a DRAC................................................................. 259 5.7.03 RMDs and other contrasts with Roth IRAs .................................................................... 260 5.7.04 DRACs: Definition of “qualified distribution”............................................................... 260 A. Qualified distribution triggering events .............................................................. 260 B. How the Five-Year Period is computed for a DRAC ......................................... 261 C. List of never-qualified distributions.................................................................... 261 D. QDROs and payments to beneficiaries ............................................................... 262 5.7.05 Nonqualified DRAC distributions .................................................................................. 262 5.7.06 Rollovers of DRAC distributions: General rules ............................................................ 263 5.7.07 DRAC-to-DRAC rollovers ............................................................................................. 264 A. May roll to any other DRAC .............................................................................. 264 B. Direct rollover ..................................................................................................... 264 C. Total direct rollover preserves basis in excess of value...................................... 264