Q&A: Roth IRA changes possible

Q Could you speak to the issue of a possible change in the rules on Roth IRAs that may occur in the future? Apparently, the government can impose taxes on these accounts in numerous ways, or change the rules in a material way that would make conversion a bad idea. Can you provide any insight on this possible negative aspect of a conversion? I am based in New York.

A. It is possible for Congress to pass legislation taking away an anticipated benefit such as income-tax free treatment of Roth IRAs. For example, although currently no federal estate tax exists, there is significant discussion about imposing a tax retroactive to January 1, 2010. With that said, in my 26 years practicing as a tax attorney, I have observed that in almost all situations in which a benefit is taken away, it is eliminated prospectively, not retroactively. In this situation, a future change could be preventing future Roth contributions or conversions and likely would not involve terminating the tax-free status of past conversions.