By Ian Berger, JD
IRA Analyst


For the last three years, I have done a back door Roth conversion. I do the conversion in January.

I am 68 years old and I am rolling over my 457(b) New York City deferred compensation plan funds to a rollover IRA with Vanguard. They will get the money around April 1, 2020. Will there be a tax penalty for the 2020 Roth conversion?


When you do a back door Roth conversion, the pro-rata rule applies if you have pre-tax funds in any of your IRAs. In that case, a portion of your conversion will be considered taxable based on the ratio of your pre-tax IRA funds to the sum of all of your IRA funds.

The pro-rata calculation is not based on the balances in your IRAs on the date of the conversion. The account balance used is the end of the year of the transaction.

So, if you are rolling your New York City account into a traditional IRA, you will have pre-tax IRA funds as of December 31, 2020. That means a portion of your 2020 back door Roth conversion will be taxable.


In looking at information regarding the exceptions for inherited IRAs under the SECURE Act, cited your company as a source to say “minors-but not grandchildren” are part of the exception.  However, I cannot find on the IRS site or any other for that matter that says grandchildren who are minors are NOT excluded.  Can you please provide the source for this?  Our firm would like to make all staff and advisors aware of this.

Thank you in advance for your time and assistance with this matter.

Best regards,



Hi Brenda,

You will find the reference to minor children in section 401(a)(2) of the SECURE Act. That section lists the categories of persons considered “eligible designated beneficiaries.” Eligible designated beneficiaries can continue to stretch out distributions over their life expectancy – even after the SECURE Act.

Besides minor children, other categories include: surviving spouses; disabled individuals; chronically ill individuals; and individuals no more than 10 years younger than the IRA owner. That section makes no mention of grandchildren – whether minor or not. This means grandchildren cannot use the stretch and instead are subject to the new 10-year payout rule.