IRS Updates

The IRS issued further on the application of the Bobrow Decision today in the attached Announcement 2014-32.  The guidance addresses/clarifies certain points:

  • The Bobrow in interpretation will definitely apply to IRAs beginning Jan. 1, 2015.
  • However, a distribution from an IRA received at any time during 2014 and properly rolled over (normally within 60 days) to another IRA (even in 2015), will have no impact on any distributions and rollovers during 2015 involving any other IRAs owned by the same individual. This will give IRA owners a fresh start in 2015 when applying the one-per-year rollover limit to multiple IRAs.
  • The Announcement confirms (for the first time) that, starting in 2015 a second or other subsequent distributions from any of the individual’s IRAs (including traditional and Roth IRAs) received within one year after a another IRA distribution will not get tax-free rollover treatment.  In other words, a rollover between an individual’s Roth IRAs would preclude a separate rollover within the 1-year period between the individual’s traditional IRAs, and vice versa. But a rollover from a traditional IRA to a Roth IRA (a “conversion”) is not subject to the one-rollover-per-year limitation, and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers.
  • The Announcement states that, for purposes of this announcement, the term “traditional IRA” includes a simplified employee pension described in § 408(k) and a SIMPLE IRA described in § 408(p).)

The announcement also confirms that the one-rollover-per-year limitation does not apply to a rollover to or from a qualified plan (and such a rollover is disregarded in applying the one-rollover-per-year limitation to other rollovers), nor does it apply to trustee-to-trustee transfers.

IRA trustees are encouraged to offer IRA owners requesting a distribution for rollover the option of a trustee-to-trustee transfer from one IRA to another IRA.

announcement 2014-32


Last week the IRS released a private letter ruling addressing certain bonus payments with respect to IRAs and 529 plans.