401k and the Roth IRA Get Married

NEW 401k Rollover Provisions 401k Rollover to IRA
10/05/2010

The Small Business Jobs Bill of 2010, (HR 5297) has been approved by congress and the President is expected to sign it. This bill has a provision that will allow the rollover of 401k and 403b and the gov't 457b plans to a designated Roth IRA account.

This is a major change to the tax code and could have a significant positive impact on your retirement. The current plans must have a designated Roth account under the plan in order to qualify. Your plan adviser will be able to determine if your plan qualifies.

The new plan will allow for state and local governments (sec. 457b plans) to include Roth accounts. Currently only the 401k & 403b are permitted. The new provision will take effect for the tax year beginning after 12/31/2010

The bill has made some significant change to the existing rules governing annuities, endowments and life insurance contracts. It allows for the contracts to be partially annuitized providing that the annuitization period is for at least 10 years, or for the lives of one or more individuals.

NOTE: If a plan does not currently have a "designated" Roth IRA program, a designated Roth program will not be allowed to be such for the sole purpose to accept the rollover contributions.

Be sure to check with your plan administrator for more details.

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