Notice 2020-51 and Roth

[Gruegen]

Treasury Regulation 1.402A-1, Q&A-5(a) states that distributions attributable to designated Roth contributions that include amounts that would not be taxable if they were distributed to the participant must be made via direct rollover if rolled to a designated Roth account of qualified Plan. Essentially, this Treasury Regulation requires that designated Roth rollovers between qualified plans be facilitated via direct trustee-to-trustee rollover, not via the indirect 60-day rollover process. IRS Notice 2020-51, Q&A-8 states that RMD distributions from a plan may be rolled back into the same plan, provided the plan permits rollovers and the rollover satisfies the requirements of IRC 402(c).

If a participant receives an RMD from a qualified plan in January, 2020, and such RMD includes designated Roth contributions that would not be taxable, can this individual make an indirect rollover back into the qualified plan from which it was distributed, notwithstanding Treasury Regulation 1.402A-1, Q&A-5 which generally requires Roth accounts to be rolled over via direct rollover?

 IRS Notice 2020-51 did not address this Roth rollover issue - - in fact, the word Roth never appears in Notice 2020-51.

 

[Belgarath]

I would feel very comfortable relying on the clear intent and spirit of the guidance and I'd allow it. Hard to imaging the IRS trying to argue this point, given the circumstances.

On another tangent, In "normal" circumstances I'd imagine that this direct trustee-to-trustee requirement is sometimes missed, and the payment is made to the participant and the 60-day period is used to roll into another plan. Anyone seen this, and if so, can it even be corrected or are you stuck after the 60 days has passed?