PA 529 to Roth IRA Rollovers
Effective January 1, 2024, PA 529 Account Owners are permitted to transfer funds via direct rollover from a PA 529 GSP or PA 529 IP account into a Roth Individual Retirement Account (Roth IRA) without incurring federal income tax or penalties. Direct 529 to Roth IRA rollovers are subject to the following conditions:
- Your PA 529 account must be open for 15 or more years.
- Contributions and associated earnings transferred to the Roth IRA must be in your PA 529 account for more than 5 years.
- The Roth IRA rollover amount is subject to the annual Roth IRA contribution limit for the taxable year (for 2024, $7,000 for individuals under age 50 or $8,000 for individuals age 50+) and is reduced by other Roth IRA contributions for the same beneficiary.
- There is a lifetime rollover limit of $35,000 per designated beneficiary from all 529 accounts to Roth IRAs.
- The Beneficiary of your PA 529 account from which funds are being rolled over must be the beneficiary of the Roth IRA into which the rollover is occurring.
- PA 529 Account assets must be sent directly to the Roth IRA.
The Pennsylvania Department of Revenue has determined that rollovers from a PA 529 account to a Roth IRA are subject to Pennsylvania state income tax. If Account Owners have questions regarding Pennsylvania tax treatment of rollovers from a PA 529 account to a Roth IRA, please contact the Pennsylvania Department of Revenue at 717-787-8201 or using its online customer service center available at revenue.pa.gov.
PA 529, as part of the College Savings Plan Network (CSPN), a network of the National Association of State Treasurers submitted a letter to the United States Department of the Treasury (U.S. Treasury) seeking clarification on these points. This letter also stated CSPN’s interpretation of these requirements.
Regarding the 15 year requirement, CSPN explained to U.S. Treasury that it believes that account changes including, but not limited to, beneficiary changes, account owner changes, and rollovers between 529 plans should not “reset” the 15 year requirement.
Likewise, CSPN, in its letter, opined that a change in beneficiary or account owner would not “reset” the 5 year requirement.
THESE INTERPRETATIONS MUST NOT BE TAKEN AS LEGAL OR TAX ADVICE AND U.S. TREASURY MAY ULTIMATELY DISAGREE WITH THEM. THE ACCOUNT OWNER IS SOLELY RESPONSIBLE FOR ENSURING COMPLIANCE WITH THE REQUIREMENTS DETAILED IN THIS SUPPLEMENT. PLEASE CONSULT WITH YOUR FINANCIAL, TAX, OR LEGAL ADVISOR FOR MORE INFORMATION.
How to Request a PA 529 to Roth IRA Rollover
You should contact the beneficiary’s Roth IRA provider to determine if you are eligible to make the rollover and if the Roth IRA provider has a process to initiate the rollover. If the Roth IRA provider does have such a process, PA 529 will accept the provider’s form as long as it includes the PA 529 account owner’s signature.
If the Roth IRA provider does not have a process in place, you may complete the Direct 529 to Roth IRA Rollover Form, available here.
You may not make a withdrawal to yourself or another person and then deposit the funds into a Roth IRA (indirect rollover).
If you need assistance in determining how long your Account has been open or the age of contribution(s) and associated earnings, please contact PA 529 at 800-440-4000.
Please consult your financial, tax, or legal advisor and your Roth IRA provider for more guidance.