H.R. 6450: Retirement Rollover Flexibility Act

The Retirement Rollover Flexibility Act is a proposed law aimed at modifying the rules regarding rollover contributions from Roth Individual Retirement Accounts (IRAs) to designated Roth accounts. Here’s a breakdown of what the bill would do:

Key Provisions

1. Rollover Contributions from Roth IRAs

The Bill allows individuals to transfer funds from their Roth IRAs to designated Roth accounts through a direct transaction. This includes two methods:

• The transfer of funds from an eligible Roth IRA directly to a designated Roth account.
• Automatic portability transactions that adhere to defined standards.

2. Definition of Eligible Roth IRA

The bill defines an "eligible Roth IRA" as one that meets the following criteria:

• It is the only Roth IRA maintained by the individual for the relevant tax year, or one related to a specific preceding category of plans.
• It has a balance not exceeding certain limits established by existing tax codes at the time of the transfer.

3. Treatment of Rollover Contributions

Funds transferred from Roth IRAs to designated Roth accounts will be treated as rollover contributions. This means they will be considered as investments in the contract for tax purposes, rather than taxable distributions. This helps clarify the tax implications of such transfers.

4. Amendments for Tax Coordination

The bill also modifies existing laws to ensure appropriate tax treatment when a rollover contribution is made. This involves adjustments to coordinate with the provision regarding nonexclusion periods, ensuring proper accounting of the first taxable year related to contributions made to the source plan.

5. Effective Date

The new provisions outlined in the bill would take effect for amounts transferred or distributed following the bill's enactment.

Relevant Companies

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