A conversion of a Simplified Employee Pension IRA, a simple IRA or a conduit IRA
can be recharacterized back into the pre-conversion form.
However, if the assets from a plan that would have been eligible for the ten-year averaging provision are held in a stand-alone "conduit IRA
," such amounts may be rolled into another employer retirement plan in the future, and the ten-year averaging provision may be made with respect to that plan.
The EGTRRA significantly eased the rules on rollovers of retirement savings from one type of tax-favored retirement fund to another, by removing barriers that either prohibited specific types of rollovers or required the use of a conduit IRA
to accomplish them.
Employees who roll over employer plan distributions into an IRA no longer have to keep a separate IRA--a "conduit IRA
"--in order to do a future rollover to another employer's plan.
An exception exists, however, in the case of an individual who has rolled over a distribution from a qualified plan into a "conduit" IRA and has not made any other contributions to such conduit IRA. If the amounts in the conduit IRA are attributable solely to rollovers from qualified plans, a distribution from that conduit IRA may be rolled over into another qualified plan.
Under the Act, effective for distributions made after December 31, 2001, all distributions from IRAs (regardless of whether such IRA is a conduit IRA) generally are permitted to be rolled over into qualified plans.
Previously, a conduit IRA
was needed to hold amounts between employer plans, keeping the funds separate from contributions made by individuals.
Plan portability: Funds from any IRA will be permitted to roll over into any other type of plan, essentially eliminating the need for a Conduit IRA
. (A Conduit IRA
serves as a holding tank for retirement assets until they can be invested in a retirement plan with the same provisions or features.
. If an eligible rollover from a qualified plan is rolled over to a rollover IRA, amounts from that IRA may be rolled over into another qualified plan at a future date.
* A conduit IRA converted to a Roth IRA and recharacterized as a traditional IRA retains its status as a conduit IRA.
However, a rollover from a conduit IRA (i.e., a regular IRA that received a rollover from a qualified plan or annuity) is permitted.
The proposed regulation would also extend these protections to rollover contributions that were not direct rollovers from a qualified plan; for example, such protections would apply to contributions from conduit IRAs
or to checks issued to the participant.