On December 22, 2017, President Trump signed H.R. 1, the “Tax Cuts and Jobs Act” into law. There are a few IRA-related changes that are included in the new law, which are described below:
- IRA owners may no longer recharacterize Roth IRA conversion contributions, beginning tax years after December 31, 2017. This means that an IRA owner who converts a Traditional IRA to a Roth IRA cannot “undo” the conversion by recharacterizing the conversion contribution back to a Traditional. Recharacterizations of regular contributions from Traditional to Roth IRAs and regular contributions from Roth IRAs to Traditional are still permissible.
- The deadline for tax-free rollovers of employer plan loan offset amounts has been extended from 60 days from the date of the loan offset to the participant’s tax filing deadline, plus extensions (for the taxable year in which the loan offset occurred). Certain employer-sponsored plans allow employees to take loans from the plan. If the employee terminates employment and the loan remains unpaid, then the loan is canceled and “offset” from the plan balance. This plan loan offset amount is treated as a distribution from the plan in the amount of the loan balance. The amount of the loan offset is eligible to be rolled over tax-free to an eligible retirement plant. The new law extends the timeframe to complete the rollover contribution from 60 days from the date of the offset to the plan participant’s tax filing deadline plus extensions. This is effective for plan loan offsets beginning in tax years after December 31, 2017.