Internal Revenue Bulletin: 2007-23
June 4, 2007
This announcement provides that sponsors of prototype Roth IRAs who wish to accept rollover contributions from designated Roth accounts described in § 402A of the Internal Revenue Code must amend their prototype Roth IRA documents to reflect that the Roth IRA permits these rollover contributions.
Internal Revenue Code § 402A, added by section 617 of the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”), Pub. L. 107-16, authorizes employers to offer, beginning in 2006, a qualified Roth contribution program as part of a § 401(k) plan or a § 403(b) plan. An eligible rollover distribution from a designated Roth account established under the program can be rolled over only to another designated Roth account or to a Roth IRA. Rev. Proc. 2002-10, 2002-1 C.B. 401, provided guidance on amending IRAs and IRA-based plans to reflect changes to the Code made by EGTRRA, but the guidance did not address qualified Roth contribution programs. Consequently, currently approved prototype Roth IRAs generally do not contain language permitting the acceptance of rollovers from designated Roth accounts.
Sponsors of prototype Roth IRAs may now wish to amend their documents to provide for the acceptance of rollovers from designated Roth accounts. In order for a Roth IRA that is intended to be a prototype Roth IRA to accept an eligible rollover contribution from a designated Roth account prior to an amendment permitting such rollovers, the prototype Roth IRA document must be amended and adopted no later than December 31, 2007, in accordance with procedures acceptable under Rev. Proc. 2002-10. Thus, if a prototype Roth IRA accepts a rollover from a designated Roth account prior to the date of amendment, the mere acceptance of such rollover contribution will not affect the Roth IRA’s prototype status provided the adoption of the amendment is timely. No application to the Service is required for continued reliance on an Opinion Letter. The model Roth IRAs (Forms 5305-R, 5305-RA and 5305-RB) already contain language permitting the acceptance of rollovers from designated Roth accounts, thus, users of such forms do not need to amend their IRA document to permit such rollovers.
The Roth IRA Listing of Required Modifications (“LRMs”), including acceptable designated Roth account rollover language, is available on the Service’s Web Site at www.irs.gov. (Search for “LRMs”.) These LRMs have also been updated to reflect other recent law changes, such as section 833(c) of the Pension Protection Act of 2006, P.L. 109-280, relating to inflation adjustments to the modified adjusted gross income limits that are used to determine the amount of Roth IRA contributions.
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