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New IRA Roll Over Rule Explained

Updated: Jun 25, 2021

This column first appeared in the SA Express-News and online at on February 18, 2015.


Dear Mr. Premack: I just received a notice from the bank where my traditional IRA is invested. The notice says that “on or after January 1, 2015, you are permitted to roll over only one distribution from an IRA in a 12-month period, regardless of the number of IRAs you own.” I still have some IRA funds in 3 CDs at another bank, and all three CDs mature this year. I had planned to roll the money to the new bank to consolidate them all into one account, but it looks like I can only do one account each year. Do I have to move the CD funds over three separate years under this new law? – D.I.

About a year ago, the federal Tax Court was asked to interpret the law regarding IRA roll overs. The law had, up to that time, been interpreted to allow a taxpayer to move money from one IRA into another IRA no more often than once per year. The policy applied separately to each IRA account owned by a taxpayer.

Thus, before the Tax Court ruling, if you had an IRA at Bank 1, another IRA at Bank 2 and a third IRA at Bank 3, you were allowed to roll funds from account 1 once per year, to roll funds from account 2 once per year, and to roll funds from account 3 once per year.

The Tax Court ruled, however, that that interpretation was incorrect. The court said that the one-rollover-per-year limit applies per taxpayer, not per account. In the example above, if a transfer of funds is rolled from Bank 1 to Bank 2, the taxpayer cannot make any further rollovers for the next 12 months. If the CD at Bank 2 then matures, the funds cannot be rolled over to Bank 3 until 12 months have passed.

Although this legal ruling was issued in January 2014, the IRS decided to give taxpayers a transition period before the new interpretation would be applied. As of January 1, 2015 the new interpretation’s limit on roll overs is being enforced by the IRS.

The law defines a roll over in a special way. When money is distributed from an IRA directly to the taxpayer, the taxpayer must deposit that money into another IRA within 60 days. If the re-deposit is not made, then the taxpayer must take the roll over as taxable income in that calendar year, and if the taxpayer is not yet age 59½ there is likely also a 10% penalty for early withdrawal.

Consequently, the roll over strategy should be abandoned as too restrictive and too risky an approach for moving funds between different IRA accounts. Instead, taxpayers should utilize direct trustee-to-trustee transfers. For example, a transfer of IRA funds from an account at Bank 1 to an account at Bank 2 would be handled, at the taxpayer’s instruction, directly between the two banks. The funds are never placed into the hands of the taxpayer (as they are in a roll over situation), but go straight from bank-to-bank. This type of transfer eliminates the one-time-per-year limit. It eliminates any possibility of the taxpayer missing the 60 day time limit, and thus eliminates the risk of owing taxes and penalties for missing the 60 day time limit.

The notice you received from your bank is explained in more detail in IRS Publication 590, which can be obtained free from the IRS website at

Remember also that IRA accounts often represent a substantial portion of a person’s assets. If the IRA owner dies, the IRA will be distributed according to the beneficiary designation on record with the IRA Custodian. Check your designations to be sure the funds will be paid as you desire, and cross-check the beneficiary designations to your Will to be sure that they are consistent, not contradictory. Discuss the best approach with your Estate Planning Attorney.


Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via


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