(November 10, 2014) The IRS released News Release IR-2014-107 and Announcement 2014-32 as follow-up to Announcement 2014-15 which the IRS released earlier this year communicating the IRS’s intention to change its interpretation of the 12-month IRA-to-IRA rollover rule. While the IRS had historically interpreted IRC Section 408(d)(3)(B) as applying to each IRA, the IRS announced in Announcement 2014-15 that it would change its stance on the rollover rule to the interpretation of IRC Section 408(d)(3)(B) found by the Tax Court in Bobrow v. Commissioner and that the agency would begin applying the rule as one rollover per individual.
Announcement 2014-32 confirms that the IRS intends to enforce the new Bobrow interpretation of rule for IRA distributions received on or after January 1, 2015. This means that an individual receiving an IRA distribution on or after January 1, 2015, cannot roll over any portion of the distribution into an IRA if the individual had already received a distribution from any IRA during the preceding 12 months and that distribution was subsequently rolled over into an IRA.
Announcement 2014-32 also offers some transition relief as to how distributions received prior to January 1, 2015 fit into the mix. As a transition rule for distributions in 2015, a distribution occurring in 2014 that was rolled over is disregarded for purposes of determining whether a 2015 IRA distribution can be rolled over, provided that the 2015 distribution is from a different IRA that neither made nor received the 2014 distribution. In other words, the Bobrow aggregation rule, which takes into account all distributions and rollovers among an individual’s IRAs, will apply to distributions from different IRAs only if each of the distributions occurs after 2014.
The IRS also reiterated in Announcement 2014-15, that the new 12-month rule will be per individual regardless of the number and types of IRAs (i.e., Traditional, SEP, SIMPLE and Roth) that an individual holds, and that the 12-month rule limitation does not apply to rollover to or from a qualified plan, IRA-to-IRA transfers or Roth IRA conversions. The newly released announcement also encourages IRA providers to offer IRA owners requesting a distribution for rollover the option of an IRA-to-IRA transfer.
(submitted by Convergent Retirement Plan Solutions, Inc.)
Click here to access News Release IR-2014-107
Click here to access Announcement 2014-32