The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing


Subject:  Rollover OUT of Roth, INTO State Pension Plan Date:  9/19/2012  11:27 PM
Author:  PsychoKnight1 Number:  70924 of 88778

Hi Folks,

I want advice in seeking an exemption/waiver with IRS to do something that is clearly illegal, yet clearly within the purpose and general intention of IRS tax code on moving funds between IRA and Pension Plans.

My wife and I are both public teachers in CA, in our mid-40's and decided that our Roth IRA funds would be better invested by purchasing service credit toward our CA State Teacher's Retirement system plan. It will cost about $140k to purchase the maximum years between the two of us. The STRS brochure about purchasing service credit says that funds from a traditional IRA can be roll-overed directly to the plan to pay for the purchase. It doesn't mention Roth IRA, only traditional IRA.

Distribution rules on the IRS website on Roth IRA's do not mention moving funds into a pension plan as a permissible distribution. Because traditional IRA's can be rolled into a pension plan, but not mentioned in rules regarding Roth IRA, I have to believe this distinction the result of an oversight in the creation and subsequent modification of Roth IRA regulations.

Should I pursue a clarification from a governing body within IRS, or which oversees the IRS, to decide if what I want to do is permissible and should be granted free of any penalty or tax triggers? The $140k we need to pay for service credits will translate to just under $200k if we get hit with the 10% penalty on the full distribution and have the capital gains from the distribution added as ordinary income to our year's salary. I anticipate a 45-50% combined penalty and tax hit.

Help. What should I do? Who do I talk to in this bureacracy?

Thanks for any specific advice,
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us