SECTION 2. BACKGROUND AND

GENERAL INFORMATION

.01 Internal Revenue Code § 408A, added by § 302 of the Taxpayer Relief Act of 1997, Pub. L. 105–34, permits the establishment of a new type of individual retirement arrangement, a Roth IRA, that taxpayers can use, beginning in 1998, to save money for their retirement or their beneficiaries. Except as otherwise provided in § 408A and the regulations thereunder, a Roth IRA is treated the same as a traditional IRA.

.02 Subsections (a) and (b) of § 408 set forth general requirements for individual retirement accounts and individual retirement annuities, respectively.

.03 Section 408(c) provides that a trust established by an employer or an association of employees for the benefit of employees or members, respectively, is treated as an IRA if there is a separate accounting for each employee or member and the trust otherwise satisfies the requirements of § 408(a) (a “section 408(c) IRA”).

.04 In 1997, the Service issued two model forms, Form 5305–R and Form 5305–RA that may be used to establish a Roth IRA as a trust account or a custodial account, respectively. In 1998, the Service issued Form 5305–RB, a model endorsement that can be used to establish a Roth individual retirement annuity. Model forms issued by the Service contain preapproved language that, if followed, will satisfy the applicable statutory requirements. Model forms should not be submitted to the Service, even if additional provisions are added to Article IX of the forms, provided that the additional provisions comply with the instructions for Ar

ticle IX. (But see section 3.05 of this revenue procedure regarding automatic approval of Roth IRA documents that contain language identical to a model form.)

.05 Announcement 97–122, 1997–50 I.R.B. 63 (December 15, 1997), which was issued at the same time as Forms 5305–R and 5305–RA, announced the issuance of these forms and provided interim guidance on Roth IRAs.

.06 On September 3, 1998, proposed Income Tax Regulations under § 408A were published in the Federal Register (63 F.R. 46937).

.07 Notice 98–49, 1998–38 I.R.B. 5 (September 21, 1998), provides guidance on Service-approved Roth IRA documents and IRA reporting requirements.

.08 Notice 98–50, 1998–44 I.R.B. 10 (November 2, 1998), provides guidance on reconverting amounts from a traditional IRA to a Roth IRA.

.09 Rev. Proc. 87–50, 1987–2 C.B. 647, provides the procedures for a sponsoring organization or a mass submitter (a “prototype sponsor”) to apply to the Service for an opinion letter on whether a prototype traditional IRA meets the requirements of § 408(a) or (b). Rev. Proc. 87–50 also contains procedures for employers and employee associations to apply for a ruling on a section 408(c) IRA.

.10 Rev. Proc. 98–8, 1998–1 I.R.B. 225 (January 5, 1998), provides guidance to taxpayers for complying with the userfee program as it pertains to matters under the jurisdiction of the Assistant Commissioner (Employee Plans and Exempt Organizations).