Life and Death Planning for Retirement Benefits

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Chapter 5: Roth Retirement Plans 235
 The Ordering Rules matter also for someone who converts a traditional plan to a Roth IRA
before reaching age 59½, and then takes a distribution within five years after the conversion
and while still under age 59½. The Ordering Rules will apply in determining whether the
10 percent penalty applies to the distribution. See
5.3 How to Fund a Roth IRA; Regular and Excess Contributions
This section lists every known way to fund a Roth IRA; explains the rules for “regular”
Roth IRA contributions; and tells how you can incur an “excess” Roth IRA contribution.
5.3.01 The eight ways to fund a Roth IRA
The law provides at least eight ways to fund a Roth IRA. Each method has its own rules
and eligibility requirements.
 An individual who has compensation income (and whose adjusted gross income is under
certain levels) can make a “regular contribution ” to a Roth IRA. Se
 A participant who owns a traditional retirement plan or IRA can transfer funds (or “roll
over” distributions) from the traditional plan or IRA to a Roth IRA. This is called a “Roth
conversion.” See
 A participant can roll money from a DRAC into a Roth IRA. See
 See for the ability of a surviving spouse (or for other Designated
Beneficiary) to transfer funds from an inherited traditional plan to a Roth IRA.
 Certain U.S. military death gratuities can be contributed to a Roth IRA. For details, see
and IRS Publication 590 (“IRAs”; 2009 ed., p. 63). This type of contribution
is not covered in this book.
 A qualified reservist distribution may be contributed to a Roth IRA; see
C).
 Certain individuals who received compensation in connection with the Exxon Valdez oil
spill can contribute up to $100,000 of their settlement to a Roth IRA or other eligible
retirement plan. For details, see § 504 of the Emergency Economic Stabilization Act of
2008 and IRS Publication 590 (“IRAs”; 2009 ed., p. 27–28, 64). This type of contribution
is not covered in the Code or in this book.
 Certain qualified airline employees can contribute to a Roth IRA (only), within 180 days
of receipt, certain payments they receive in connection with the bankruptcy of a
“commercial passenger airline carrier.” See § 125 of the Worker, Retiree, and Employer
Recovery Act of 2008 and IRS Publication 590 (“IRAs”; 2009 ed., p. 64). This type of
contribution is treated as a qualified rollover contribution to the Roth IRA (See , and
is not covered in the Code or in this book.
5.3.02 “Regular” contributions from compensation income