The Journal of Accountancy reports on changes the IRS proposes to allocation rules for rollovers.  It’s article begins as follows:

The IRS says it has become aware that some plan providers have been treating disbursements from retirement plans that contain both pretax and after-tax contributions as a single distribution of the aggregate disbursement amount, rather than as separate distributions, as required by the regulations. In proposed regulations issued on Thursday REG-105739-11 and Notice 2014-54, the IRS gave its blessing to this treatment, providing rules on how to allocate pre- and after-tax amounts distributed from IRAs, including Roth IRAs, to multiple destinations.

Current Regs. Sec. 1.402A-1, Q&A-5a provides that “any amount paid in a direct rollover is treated as a separate distribution from any amount paid directly to the employee.” Under the proposed amendment, that separate distribution requirement would not apply to distributions made on or after Jan. 1, 2015, or an earlier date the taxpayer chooses, so long as that date is not earlier than Sept. 19, 2014, the date the regulations were filed for public inspection in the Federal Register.

Under the new rules, all disbursements of benefits from the plan to the recipient that are scheduled to be made at the same time are treated as a single distribution no matter whether the recipient has directed that the disbursements be made to a single destination or multiple destinations.

Read more at Changes proposed to allocation rules for rollovers.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.