4.5 Other Portability Transactions: Repayments, Recontributions, and Special Rollovers

Why "Other Transactions" Matter

Domain 3 of the CISP outline ends with a fifth task: other transactions (e.g., repayments, recontributions). These are deposits that are neither regular contributions nor ordinary rollovers, yet they do not count against the annual contribution limit if they qualify. If the bank codes one as a regular contribution, the owner may appear to have an excess contribution. If the bank accepts a deposit that does not qualify, the owner has an excess contribution in fact. The teller's question is always the same: what kind of money is this, and what is the deadline that makes it eligible?

Repayments of Special Distributions

Several provisions let an owner take money out without the 10% additional tax and later put it back as if it were a rollover. A repayment is treated as a trustee-to-trustee transfer or rollover made within 60 days, so it does not use the owner's contribution limit, and the owner can amend the earlier return to recover tax paid on the distribution.

The trustee enters the amount in Box 14a and the code in Box 14b of Form 5498. Two cautions apply. First, the bank does not need to prove the owner's earlier distribution qualified, but it should obtain a written statement identifying the type of distribution being repaid and keep it in the file. Second, a repayment cannot exceed the amount of the original qualifying distribution.

First-Time Homebuyer Recontributions

A first-time homebuyer distribution must be used within 120 days. If the purchase is delayed or cancelled, the owner may put the money back within 120 days of receiving it, and the recontribution is treated as a rollover (IRC § 72(t)(8)(E)). Because the 120-day window is longer than the 60-day rollover period, operations staff should not reject a day-90 deposit labeled "home purchase cancelled" without checking this rule. The 2026 instructions give this repayment its own Box 14b code, HP.

Plan Loan Offsets

When a participant leaves an employer with an unpaid 401(k) loan, the plan may reduce (offset) the account balance by the loan amount. A qualified plan loan offset can be rolled over to an IRA until the participant's tax return due date, including extensions, for the year of the offset (IRC § 402(c)(3)(C)). The participant must replace the offset amount with other funds, because the plan kept it to repay the loan. The receiving IRA reports the rollover in Box 2 and also completes Boxes 13a–13c with code PO.

Late Rollovers Treated as Postponed Contributions

Boxes 13a–13c are also used for rollovers or contributions made late under relief provisions:

• SC – late rollover self-certified under Rev. Proc. 2020-46;
• FD – a contribution or rollover by an affected taxpayer in a federally designated disaster area;
• An executive order or public law number – contributions postponed for combat-zone service.

529 Plan to Roth IRA Rollovers

SECURE 2.0 § 126 allows the beneficiary of a 529 qualified tuition program to move money to a Roth IRA for that same beneficiary, starting in 2024. The 2026 Form 5498 instructions summarize the conditions:

• The money must move by direct trustee-to-trustee transfer.
• The 529 account must have been open for more than 15 years. Contributions made in the last 5 years (and their earnings) are not eligible.
• Each year's rollover counts against the Roth IRA annual contribution limit (reduced by any other IRA contributions for the year), and the beneficiary must have compensation at least equal to the amount. The Roth income phase-out does not apply.
• The lifetime maximum is $35,000.

The receiving trustee reports the amount in Box 10 with the Roth contributions for the year it is designated, not in Box 2.

Transfers Incident to Divorce

Under IRC § 408(d)(6), transferring all or part of an IRA to a spouse or former spouse under a divorce or separation instrument is tax free, and the transferred interest becomes the recipient's own IRA. The Form 1099-R instructions say not to report such a transfer. Banks should keep a copy of the decree or instrument showing the IRA division, because a transfer made without one is a taxable distribution to the original owner. IRAs are not divided by a QDRO, which applies only to employer plans.

One-Time HSA Funding Distribution

An owner who is eligible for a health savings account may make a once-per-lifetime, direct trustee-to-trustee qualified HSA funding distribution from a traditional or Roth IRA to an HSA (IRC § 408(d)(9)). The amount is limited to the owner's HSA contribution limit for the year and is excluded from income, but the owner must remain HSA-eligible for a 12-month testing period or the amount becomes taxable plus a 10% additional tax.

Bank Operations Scenario: Three Unusual Deposits

On March 10, 2026, a branch receives three deposits to traditional IRAs:

1. Lena brings $4,000. In 2025 she took a $5,000 qualified birth or adoption distribution after her daughter was born. Because the distribution was after December 29, 2022 and within 3 years, the bank accepts the $4,000 as a repayment, reports Box 14a $4,000 with code BA, and keeps Lena's signed statement in the file. The repayment does not reduce her 2026 contribution room.
2. Raj brings $18,000 from a 401(k) that offset his loan when he left his job in June 2025. He is filing his 2025 return on extension. The offset is a qualified plan loan offset, so the bank reports Box 2 $18,000 and Boxes 13a–13c with code PO.
3. Maya brings $9,500 she withdrew on December 20, 2025 for a home purchase that fell through. She is past the 60-day rollover deadline, but still within 120 days, so the deposit qualifies as a first-time homebuyer recontribution. The bank reports it with code HP and reminds Maya that only $10,000 of lifetime homebuyer distributions qualify for the exception.