[9454]
November 25, 1997
TO: PENSION COMMITTEE No. 47-97
PENSION OPERATIONS ADVISORY COMMITTEE No. 46-97
RE: LETTER TO IRS ON ROTH IRA CONVERSION REPORTING ISSUES
______________________________________________________________________________
Last week, the Institute sent a letter to the Internal Revenue Service regarding various Roth IRA
reporting issues. This letter discusses the ability of the mutual fund industry to facilitate tax reporting for
Roth IRA conversions executed via direct transfers. In addition, the letter reiterates our request
regarding priority guidance from the Service concerning Roth IRA issues.
At a recent meeting involving industry representatives and various Service representatives, we
discussed the reporting issues that arise pursuant to Roth IRA conversions. Specifically, we discussed
the differences between current trustee-to-trustee transfers that do not require tax reporting and Roth IRA
conversions that will require tax reporting. The Service raised the concern that financial institutions will
not properly report future "trustee-to-trustee" transfers involving Roth IRA conversions, i.e., issue a
Form 1099-R and Form 5498, and requested assurance that financial institutions will properly report
these transactions.
In the letter, we described a current distribution methodology that may serve as a model for Roth
IRA conversions executed via a direct transfer. We emphasize that this is not the exclusive means to
facilitate a Roth IRA conversion, however, it is a distribution method that is currently utilized and should
not raise new systems or operations issues. The Service has discussed requiring tax reporting for all
trustee-to-trustee transfers as an alternative method. In our letter, we emphasized that this alternative
would confuse taxpayers and inundate the Service with unnecessary tax filings.
Finally, we requested that the Service issue guidance concerning the custodial and trustee
documents for the Roth IRA. Specifically, we requested that the Service issue guidance concerning the
ability of financial institutions to combine the Roth IRA custodial or trustee documents with traditional
IRA documents and issue model language for these documents. A copy of the letter is attached.
Kathryn A. Ricard
Assistant Counsel - Pension
Attachment (in .pdf format)