Are There Annual or Lifetime Limitations on Roth Conversions?

Our ERISA 403(b) plan allows for both Roth deferrals and Roth conversions. Are there any restrictions as to the number of Roth conversions a participant may complete in a year, over one’s lifetime, etc.?

Kimberly Boberg, Taylor Costanzo, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

There are no restrictions as to the number of Roth conversions that may be completed during any particular time period, unless your plan document contains such a restriction.

This is an interesting question in that Code Section 402A, the section that governs Roths, does not place any restrictions as to the number of Roth conversions, but it does not specifically state that Roth conversions are unlimited. The regulations don’t address the issue. However, most practitioners agree that there are no restrictions on the number of Roth conversions in a 403(b)/401(k)/governmental 457(b) plan.

Please note that should you convert pre-tax contributions, you will owe taxes on both your converted contributions and any investment earnings on such amounts generated before your conversion date. Similarly, if you are converting after-tax contributions, you will owe taxes on any investment earnings on such converted amounts generated before your conversion date.

Finally, each Roth conversion does start its own five-year holding period for determining whether subsequent distributions of such amounts are subject to penalties.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice. 

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