529-to-Roth Transfer: Post SECURE Act 2.0

Originally Published on 1/25/24by Prof. Robert Bloink and Prof. William H. Byrnes

It’s now 2024, and the SECURE Act 2.0’s 529-to-Roth IRA transfer option is officially live and available to taxpayers. However, the IRS has yet to provide any type of detailed guidance on the rules that will apply to these rollovers. While allowing taxpayers to execute tax-and-penalty-free rollovers from 529 plans to Roth IRAs can be extremely helpful for taxpayers who don’t end up needing the college savings funds, the details are always important. While some issues have been addressed squarely by the law itself, we continue to await guidance on some important issues from the IRS—meaning that clients should tread carefully when determining how to interpret certain rules.

529-to-Roth Transfers: The Basics

Under the SECURE Act 2.0, beginning with the 2024 tax year, taxpayers are officially permitted to roll Section 529 plan dollars into a Roth IRA if certain conditions are met. The option can be particularly useful in situations where the plan’s beneficiary does not attend college or is able to fund their education with scholarships and other types of aid.