IRA IRA Rollovers and Transfers 3

Question 1

Which of the following assets CAN be rolled over from a 401(k) to a traditional IRA?

Accepted Answer

After-tax contributions (non-Roth)

Answer

After-tax (non-Roth) contributions from a 401(k) can be rolled over to a traditional IRA or directly to a Roth IRA in a tax-efficient manner.

Question 2

What is a 'net unrealized appreciation' (NUA) strategy and how does it relate to IRA rollovers?

Accepted Answer

A strategy to distribute employer stock from a 401(k) in-kind rather than rolling it to an IRA, taxing appreciation at capital gain rates instead of ordinary income rates

Answer

NUA allows the appreciation on employer stock distributed from a 401(k) to be taxed at capital gains rates rather than ordinary income rates, which can be more favorable than rolling to an IRA.

Question 3

Can a SIMPLE IRA be rolled over to a traditional IRA at any time?

Accepted Answer

Only after the two-year participation period has been satisfied

Answer

SIMPLE IRA funds cannot be rolled to a traditional IRA or other retirement plan during the first two years of participation; after two years, rollovers are permitted.

Question 4

If an individual performs a direct rollover from a 401(k) to a traditional IRA, does the IRS consider this as using their one rollover per year?

Accepted Answer

No, direct rollovers from employer plans to IRAs are not subject to the once-per-year rule

Answer

The once-per-year rollover rule applies only to IRA-to-IRA indirect rollovers; direct rollovers from employer plans are not counted.

Question 5

What is a reverse rollover in the context of IRAs?

Accepted Answer

Rolling IRA funds into an employer-sponsored retirement plan

Answer

A reverse rollover moves money from a traditional IRA into an employer plan like a 401(k), which can be useful for applying the Rule of 55 or avoiding RMDs while still working.

IRA - Individual Retirement Account Practice Test

IRA - Individual Retirement Account Practice Test

IRA IRA Rollovers and Transfers 3