Roth Deposits from 529 (NEW IRS RULE for 2024)

[acask]

The Secure 2.0 Act passed a rule that allows for Roth distributions to be paid from a 529 for a beneficiary  (see Section 126). There is a lifetime max of $35K that can come from 529s, and of course we have to follow the annual Roth Contribution Limits (meaning we can't put the lump sum of $35K into her account asap, all at once, of course). For example in 2024 the limit is $7K max subject to income qualifications, and so on. 

Assuming my child qualifies to contribute and has the funds in their 529 and chooses to do so, there is another catch.

It states the Roth must have been open for 15 years. 

Tax laws require records to be kept  7 years. Most 529 companies change hands, are bought/sold/transferred, etc. and themselves do not keep records back beyond 7 years. We've tried to trace our child's to it's origin and cannot. We can get to 11 years, but not 15.

We opened his account in 2005 but that 529 plan no longer exists so proving the account is well past 15 years old, no 529 company can trace it back beyond the 11 years. SO, how do we prove to the IRS that the Roth has actually been opened for 15 years to meet the contribution requirement?

Thank you!

[RobertB4444 · Accepted solution]

You don't need to prove that the account has been open for 15 years in order to file the return and process the distributions.  You would only have to prove it if you are audited.

If you are audited then the way to prove it - since the original financial institution is no longer a viable institution - is through your personal records.  Your bank will have records showing your contributions leaving your account back 15 years ago.  You may have to pay the bank a fee to access those records (almost certainly) but the records exist.  A contribution being sent from your account would prove that the 529 was in existence at that point.  Also, statements were sent to the IRS for the 529 at that point 15 years ago.  Accessing those statements is not a two foot putt but can be done.

@acask