Looking to roll over my old workplace 401K into traditional and Roth IRAs I set up on the same brokerage group. Thought it would be straightforward as a qualified distribution, but I'm running in to the following complexity:
In the 401K- Have 3 accounts: 401K (pretax), 401K (Roth) and an After-tax account (they allowed after-tax contributions after the regular account limits were reached).
Told brokerage my intention is to roll both the Roth and after-tax 401 accounts into the Roth IRA (mega Back-door Roth).
The online tool and the followup call to an agent, inform me they can roll the Roth 401 into a Roth IRA no problem.
However I'm being told the pre-tax and after tax will have to transfer together into a Traditional IRA, no After-tax to Roth move allowed (!).
The agent suggested once transferred, I could then split the Traditional within the IRA and transfer over to the Roth there. I am seeking confirmation on this detail, because I want to avoid being stuck with an after+pre-tax mixed IRA and RMD complexity later.
I found no restrictions in the plan document other than there was apparently no in-service rollover allowed even though they have after-tax capability. I'm thinking this is why they are saying it has to be done that way. My issue is that IRS rules seem to clearly indicate a 100% after-tax account can roll into a Roth IRA, it's been that way since 2015. It should be relatively straight forward for the brokerage to do it that way:
https://www.irs.gov/irb/2014-41_IRB#NOT-2014-54
My concern is I would have to mix separate 401K account types into a traditional IRA if I want a trustee-to trustee rollover, otherwise they can make a check out to me and I'd have to try to deposit into a Roth myself. I would think I need good documentation with the check stating it's a Roth-qualified after-tax distribution check.
Has anyone done this type of transfer and then split the after-tax back out (into Roth) after funds are in the IRA? Or, having the after-tax distributed as a check then placing into a Roth IRA? I don't think I'm going to convince the 401K people to do a trustee rollover even though it's legit to do so. Ideas?
In the 401K- Have 3 accounts: 401K (pretax), 401K (Roth) and an After-tax account (they allowed after-tax contributions after the regular account limits were reached).
Told brokerage my intention is to roll both the Roth and after-tax 401 accounts into the Roth IRA (mega Back-door Roth).
The online tool and the followup call to an agent, inform me they can roll the Roth 401 into a Roth IRA no problem.
However I'm being told the pre-tax and after tax will have to transfer together into a Traditional IRA, no After-tax to Roth move allowed (!).
The agent suggested once transferred, I could then split the Traditional within the IRA and transfer over to the Roth there. I am seeking confirmation on this detail, because I want to avoid being stuck with an after+pre-tax mixed IRA and RMD complexity later.
I found no restrictions in the plan document other than there was apparently no in-service rollover allowed even though they have after-tax capability. I'm thinking this is why they are saying it has to be done that way. My issue is that IRS rules seem to clearly indicate a 100% after-tax account can roll into a Roth IRA, it's been that way since 2015. It should be relatively straight forward for the brokerage to do it that way:
https://www.irs.gov/irb/2014-41_IRB#NOT-2014-54
My concern is I would have to mix separate 401K account types into a traditional IRA if I want a trustee-to trustee rollover, otherwise they can make a check out to me and I'd have to try to deposit into a Roth myself. I would think I need good documentation with the check stating it's a Roth-qualified after-tax distribution check.
Has anyone done this type of transfer and then split the after-tax back out (into Roth) after funds are in the IRA? Or, having the after-tax distributed as a check then placing into a Roth IRA? I don't think I'm going to convince the 401K people to do a trustee rollover even though it's legit to do so. Ideas?
Statistics: Posted by Count If — Wed Feb 07, 2024 10:00 pm — Replies 0 — Views 98