In informal talks with the IRS, it has been learned that official guidance most likely to be released this year on Roth IRAs is a prototype Roth IRA document. This is needed, of course, by mutual funds, banks and others so that they can starting setting up Roth IRA accounts in 1998. This was made available as Form 5305-R which was published on the IRS Web Site on 12/4/97.
Our early indications were that official IRS guidance is not likely to be released before 1998 on distribution rules and other technical matters involving Roth IRAs. However, we have since heard some indications that Roth IRAs are getting some more attention and some initial guidance may now be in the works.
It has been learned that the IRS is likely to apply existing pre-required minimum distribution rules to Roth IRA distributions. In other words, minimum distributions caused by the death of the owner of the Roth IRA will be applied in the same manner as if the owner died before the start of any required minimum distributions. Stated still another way, this means the traditional IRA's pre-70½ rules would apply. This results in the five-year rule and its exceptions being applied. Designated beneficiaries would be able to spread the distributions over their single life expectancies (using automatic refiguring of life expectancies or a term certain method for a surviving spouse or the term certain method for non-spousal beneficiaries such as a child). No joint life expectancies could be used since they only apply to post-required minimum distribution cases of traditional IRAs.
At a 10/28/97 meeting in Washington, D.C., of the IRS' Information Reporting Program Advisory Committee, it was noted that for Roth IRAs, guidance will first appear as instructions on reporting forms. 1998 forms will require identification of accounts as conversion accounts.
Updated on
12/4/97:
All of the above was largely confirmed with
the release of IRS Form 5305-R in early December. Particularly interesting is Article V on the form. Article V, Clause
3 provides for an automatic spousal rollover at the time of the original owner's death.
There would appear no reason why such a rollover would be required at that time if
this provision was to be eliminated.
When additional Roth IRA information and guidance is released by the IRS, it will be posted at this site.