What "new rollover option with 529s" are you asking about? The ability to roll it over to a Roth IRA? Or are you asking about some thing specific to your state?
I assume you're asking about a roll over to a Roth IRA.
Q. First, it was deemed okay to make a rollover in respect of the 2023 tax year so long as it was done after 1/1/24. Is this an accurate reading of what’s permissible?
A. No. "In order for the rollover to be federal tax-free, it must be paid through a direct trustee-to-trustee transfer. In other words, you cannot first withdraw the amount to be rolled over and then contribute that amount to the Roth IRA. If you try to do this, you will end up with an unqualified withdrawal subject to tax and penalty."
"A new option for 529 plans is the ability to roll over funds to a Roth IRA tax-free and penalty-free starting January 1, 2024. This option is subject to certain conditions, including:
- The 529 plan account must have been maintained for at least 15 years
- The amount rolled over cannot exceed the total amount contributed to the 529 plan before the five years prior to the rollover
- The rollover must be a direct rollover
- The Roth IRA must be opened by the same beneficiary as the 529 plan
- The rollover is subject to annual Roth IRA contribution limits, which are based on the beneficiary's income, not the parents'
The lifetime limit for 529-to-Roth IRA rollovers is $35,000.
Some say that it may be best to wait until later in 2024 to consider a 529-to-Roth IRA rollover, as the IRS and states may issue more guidance in the meantime."
