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[June 9, 2008]
The University has expanded the options available in the UC Retirement System by permitting rollover of qualified funds into a Roth IRA.
About the Roth IRA
In contrast to a traditional IRA, contributions to a Roth IRA are not tax-deferred - the taxable portion of the rollover distribution will be 100% taxable in the year of the distribution, with the exception to allow the tax to be spread over two years for rollover contributions to a Roth IRA made in 2010. Withdrawals of rollover contributions from a Roth IRA are generally tax-free.
An advantage of the Roth IRA over a traditional IRA is that there are fewer withdrawal restrictions and requirements. Transactions inside the Roth IRA account (including capital gains, dividends, and interest) do not incur a current tax liability. Withdrawals of rollover contributions from a Roth IRA are generally not subject to the early withdrawal penalty when the account has been opened for at least 5 years.
UC provisions for Roth IRA rollovers
Funds eligible for rollover to a Roth IRA include distributions from the DC Plan, 403(b) Plan, 457(b) Plan, UCRP lump-sum cashouts (monthly UCRP retirement/disability, preretirement survivor and postretirement income are not eligible) and the distributions from the UCRP Capital Accumulation Payment (CAP) accounts. The option to rollover to a Roth IRA is available both to UCRS members and spouse beneficiaries.
For eligible distributions before January 1, 2010, UCRS members and spouse beneficiaries can roll over to a Roth IRA if their adjusted gross income does not exceed $100,000 for the taxable year of the distribution, and they are not filing a separate tax return, if married. The adjusted gross income limit will not apply after December 31, 2009.
Further information and election process
Detailed Roth IRA tax information is available in the Special Tax Notice for Plan Distributions.
Additional information will be provided on the Fidelity Retirement Services website, the At Your Service website, and announced locally as permanent Roth IRA rollover election procedures are finalized.