Rollover IRA and EGTRRA

[Gilmore]

I am a little confused on how EGTRRA has changed the rules for rolling over IRA money into a qualified plan.

If a Plan uses the good faith EGTRRA amendment and allows rollovers from IRAs into the Plan this means that any traditional IRA can be rolled over, meaning that the IRA may consist of taxable earnings and previously taxed contributions? Does the Plan then have to account for these amounts separately?

If yes, let's say the Plan decides they do not want this extra administration, so they choose not to allow IRA rollovers, does this then negate the possibility of any type of conduit IRA rollover?

Also, if a Plan allows traditional IRA contributions to be rolled into the Plan, does the IRA money retain its IRA charectoristics, or does it take on the charactoristics of a qualified plan. For example, does the traditional IRA money lose the home buyer and education expense exceptions for distributions; can minimum distributions from the IRA money be delayed until after retirement; can loans be made against the rollover money?

Any insight into IRA rollovers would be appreciated.

[Blinky the 3-eyed Fish]

In order of your questions:

Maybe, depending on your EGTRRA language.

Yes, if allowed to be rolled over.

It would depend on how your language reads whether the conduit IRA's were now excluded. The EGTRRA Amendment should have a choice to now allow after-tax money to be rolled over into the plan. This will solve your problems on this subject.

There have been many discussions on this in the message boards.

[Gilmore]

Thank you for your reply. I did go back and read some of the previous postings as you suggested. Am I correct that most opinions lean toward the IRA taking on the qualified plan characteristics? And also, if the EGTRRA amendments were written to not allow after-tax money than it would be the responsibility of the participant to determine what portion of the IRA could be rolled into the plan?

Thanks again.

[Blinky the 3-eyed Fish]

You are correct.

As far as whose responsibility it would be, I would think both. It would be to the plan sponsor's detriment to allow after-tax dollars into the plan and operate the plan outside the document language. It would be to the individual's detriment to roll over post-tax dollars as pre-tax.

[Belgarath]

I think I'm missing something here. I thought that the only IRA amount which could be rolled to an eligible retirement plan was the amount which is "includible in gross income." See 408(d)(3)(A)(ii) as amended by EGTRRA. So this would preclude the nontaxable basis in the IRA from being rolled over to the qualified plan. Has something additional been passed that supercedes this, or am I misinterpreting something?