Rollovers in Sharper Focus

By John Iekel • April 07, 2014 • 0 Comments

IRS guidance and a pointed reminder from an industry group illustrate the increased frequency and importance of rollovers, not to mention that they are piquing the interest of federal regulators and interest groups.  

When a rollover takes place from a non-Roth balance to a Roth balance in a 401(k), 403(b) or 457(b) plan account, the distribution restrictions that applied before the rollover still apply to the converted balances. McDermott, Will & Emery cites this as the most important part of IRS Notice 2013-74 — dispelling confusion over whether plan participants could take in-service distribution of otherwise undistributable amounts that had been rolled over to Roth balances. 

McDermott, Will & Emery cautions plan sponsors that permit in-plan Roth rollovers, or are considering doing so, to review the notice to make sure the plan complies and includes information on how often such conversions may be made and whether there are any limits on how much can be converted.  

FINRA sounded a note of caution concerning such rollovers in December. In Regulatory Notice 13-45, FINRA announced that it plans to closely examine how financial services firms, especially broker dealers, make recommendations to plan participants who terminate employment and must decide what to do with the money in their retirement plan accounts. That notice is causing some turmoil among brokers dealers. And lastly, what firms do concerning IRA rollovers is one of the matters FINRA has made a priority in 2014.


John Iekel is Senior Writer at ASPPA, as well as Editor of the ASPPA Net and NTSA Net web portals.