What is a 'Conduit IRA'

A conduit IRA is an account used to roll over funds from a qualified retirement plan to another qualified plan. Typically, the intention of using this type of Individual Retirement Account (IRA) is to store assets until they can be rolled over into a new employer's qualified plan. A conduit IRA is also known as a "rollover IRA."


A conduit IRA is set up by signing an IRA Plan Agreement. There is no specific provision for creating a conduit IRA. Rather, simply meeting certain rules, such as not commingling assets from another source and ensuring that the money originated from a qualifying rollover or a direct rollover from a qualified plan or 403(b), are the only requirements. There is no limit on the sum of contributions transferred to a conduit IRA from a qualified plan, nor on the number of transactions that may be made. An individual need not contribute 100% of the assets in their qualified retirement plan to the conduit IRA. Also, there is no time limit on a conduit IRA. Assets could reside and grow in a conduit IRA for decades and still be rolled over into a new employer's 401(k) plan. There is also no minimum length of time that assets must remain in a conduit IRA.

The rules covering the commingling of retirement account assets are found in section 408(d)(3)(A)(ii) of the U.S. Code and in the Internal Revenue Service (IRS) guide to Rollovers of Retirement Plan and IRA Distributions. A guide with more conduit IRA guidelines may be found here.

Conduit IRA Benefits

The biggest benefit of a conduit IRA is the flexibility it affords an individual who has left a job and must find a place to park 401(k) assets (or assets from another qualified retirement plan). Specifically, a conduit IRA provides a way around the IRS 60-day rollover requirement. In many cases, it takes more than 60 days to find a new job and complete the process of porting assets from one retirement plan to another. Without using a conduit or rollover IRA, an individual might receive a tax penalty for taking an early distribution.

Conduit IRA Disadvantages

For all the flexibility conduit IRAs offer, there are some tradeoffs. For example, once assets have been transferred to a conduit IRA, no additional contributions may be made. If a conduit IRA user has no other retirement savings vehicle at their disposal, they will be unable to contribute to a tax-advantaged savings plan and may fall behind of their retirement savings goals. Similarly, money may not be transferred into the conduit IRA from other sources otherwise it will lose its tax advantage (no longer able to accumulate capital gains tax-free and be eligible for forward averaging tax treatment).

  1. IRA Plan

    An IRA plan is an investment account individuals may establish ...
  2. Individual Retirement Account - ...

    An individual retirement account is an investing tool individuals ...
  3. IRA Asset Will

    An IRA asset will is a document specifiying how the assets in ...
  4. Qualified Distribution

    A qualified distribution is made from a Roth IRA and is tax and ...
  5. Roth IRA

    A Roth IRA is an individual retirement plan that bears many similarities ...
  6. Rollover

    A rollover may entail a number of actions, most popularly the ...
Related Articles
  1. Retirement

    Tips for Properly Aggregating IRA Accounts

    When it comes to IRAs, there are times when they can be combined, or aggregated, and times when they can't. Here are some basic rules to follow.
  2. Retirement

    A Layman's Guide to Traditional and Roth IRAs

    Traditional and Roth IRAs have similarities and differences, but both help you save for retirement.
  3. Retirement

    Moving Retirement Plan Assets: How To Avoid Mistakes

    Sometimes things go wrong in a simple transfer of funds. Make sure you know how to avoid penalties.
  4. Financial Advisor

    7 Top IRA Strategies for Your Clients

    With IRA season in full swing, advisors should consider these seven strategies for clients.
  5. Retirement

    Your IRA Can Be a Multi-Generational Estate Plan

    Here is how you can set up your IRA to be part of your estate plan.
  6. Retirement

    Guide To 401(k) And IRA Rollovers

    Follow the steps detailed below when you need to roll over your 401(k) or IRA account to be sure you preserve tax benefits and avoid penalties.
  7. Retirement

    Which Is Better, a Traditional IRA or Roth IRA?

    Traditional IRAs and Roth IRAs have different benefits, but both are great for retirement savings.
  8. Taxes

    How IRS Form 5498 Helps You

    If you have an IRA, you'll be getting this form. Here's the useful information it contains.
  9. Retirement

    What's the Tax Hit on an IRA Withdrawal?

    How much taxes you'll pay on IRA withdrawals depends on a variety of factors. Use this guide to plan ahead.
  10. Retirement

    Avoiding "Prohibited Transactions" In Your IRA

    To avoid jeopardizing your IRA assets, find out what transactions are prohibited.
Trading Center