College Savings Rollovers to Roth IRAs Proposed

Senators Richard Burr (R-NC) and Bob Casey (D-PA) have introduced the College Savings Recovery Act, to allow families to transfer unused funds in their college savings 529 accounts into a Roth IRA. The College Savings Recovery Act was originally included as part of Senator Burr’s Boost Savings for College Act proposed in 2017.

The bill would allow an account owner or beneficiary under a qualified tuition program to complete a special rollover to a Roth IRA maintained for the benefit of such account owner or beneficiary so long as the amount distributed had been maintained in the program for the 10-year period ending on the date of such distribution, and the amount did not exceed the lesser of

• The annual Roth contribution limit reduced by any Roth contributions made for the tax year of the distribution, or
• The aggregate amount contributed to the program (and earnings attributable thereto) before the 5-year period ending on the date of the distribution.

The rollover to the Roth IRA would be treated as a qualified rollover contribution with the contributions and earnings made to the qualified tuition program treated in the same manner as earnings and contributions of a Roth IRA. The qualified tuition program would be responsible for providing a report to the trustee of the Roth IRA which would detail contributions, distributions, and earnings of the program as of the date of the distribution.