Distributions, Rollovers and Portability - Tax Law Changes - Qualified Retirement Plans - IRAs - Asset Allocation

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Distributions, Rollovers and Portability

Portability of retirement assets has been a significant concern lately. Workers are changing jobs more than ever and, as a result, might participate in several retirement plans during their careers. Under the previous pension laws, assets accumulated within different retirement plans could only be rolled over to IRAs or to similar types of qualified plans. Under the new law, there is more flexibility, and as a result, workers may be more willing to save with these plans for retirement, knowing that their assets can move with them readily from employer to employer, while retaining the benefits unique to qualified retirement plans.

Rollover Rules
Under current law, participants are able to roll over taxable distributions from qualified plans and IRAs to 403(b) and government 457 plans, in addition to other qualified plans and IRAs, although those plans will not be required to accept rollovers. Participants will also be able to rollover distributions of after-tax employee contributions from qualified plans or an IRA to a defined contribution plan or IRA. A rollover of after-tax amounts to a defined contribution plan must be transmitted through a trustee-to-trustee transfer. The accepting plan must separately account for the after-tax amounts.

Spouses who participate in a 403(b), government 457 or qualified plan may roll over distributions from their deceased spouse's plan into their own plan, provided the accepting plan includes a rollover provision. And with IRS approval, the 60-day period in which to make a rollover can be extended if not doing so would be against "equity or good conscience," as stated by the act. Examples of instances when the waiver of the 60-day period will be considered appropriate include matters outside the control of the individual, such as a natural disaster, hospitalization or a failure of a financial institution to process the rollover in a timely manner.

Next: Tax Credits for Low-Income Savers


		Rollover Chart This chart illustrates what can and cannot be rolled over between various qualified retirement programs, as well as government-sponsored 457 plans.