The IRS has clarified how the one-per-year rollover rule change for individual retirement arrangements (IRAs) will affect 2014 rollovers and how the rules will apply starting in 2015.
 

An IRA distribution can be treated as a tax-free rollover, as long as the amount distributed is paid into an IRA for the taxpayer's benefit within 60 days, now subject to the one-rollover-per-year limit. Prior IRS guidance had applied this rule on an IRA-by-IRA basis. However, a recent Tax Court case applied the rule on an aggregate basis, meaning that the taxpayer is limited to one rollover per year regardless of how many IRAs he or she has. In March, the IRS announced it would follow this decision.
 

The application of the one-per-year limit on an aggregate basis will start in 2015. This means that an individual receiving an IRA distribution on or after Jan. 1, 2015 cannot roll over any portion of the distribution into an IRA if in the preceding one-year period the individual has received a distribution from any IRA that was rolled over into another IRA. As the IRS specifically noted, a rollover between an individual's Roth IRAs would preclude a separate rollover within the one-year period between the individual's traditional IRAs, and vice versa.
 

The announcement also contains a transition rule. For 2015, the IRS will disregard a distribution occurring in 2014 that was properly rolled over to another IRA in determining whether a 2015 distribution can be rolled over, as long as the 2015 distribution is from a different IRA that neither made nor received the 2014 distribution. The aggregation rule will apply to distributions from different IRAs only if each distribution occurs after 2014.
 

The IRS made it clear that this new rule does not apply to Roth conversions, trustee-to-trustee rollovers, or rollovers between qualified plans and IRAs. It also explained that trustee-to-trustee rollovers include both direct transfers between trustees and rollovers where IRAs issue checks payable to the IRA trustee. The IRS is encouraging IRA trustees to offer to do direct rollovers to individuals requesting rollover distributions so that account holders will not be subject to these rules.