401(k) pre&post rollover to IRAs
I have a 401(k) that is a mixture of traditional pre-tax 401(k) contributions and growth plus some Roth 401(k) contributions and growth, all in one account. Is it possible to roll this out to two separate IRAs, one TIRA and one Roth IRA? Or would it have to be rolled out to a TIRA with both pre and post tax amounts accounted for separately.
TIA,
Ray
Permalink Submitted by Al Fry on Tue, 2008-01-15 18:27
The Roth & Roth Growth should go into a Roth, the balance into a TIRA. The R-401(k) would have be kept separated from the T-401(k) in the current plan. Of course any part of the T-401(k) balance could also go into a Roth IRA this year, if one qualifies.
Permalink Submitted by Alan Spross on Tue, 2008-01-15 18:53
Al is of course correct. Before any distribution can be made, you must qualify for plan distributions, and that involves separating from service or in some cases reaching age 59.5 or other age designated in the plan document.
Some people have been using “post tax” or after tax 401k contribution terminology in conjunction with Roth account contributions. This is confusing since both types of contributions can now be made to an employer plan. It is best to refer to Roth contributions specifically by name to separate them from after tax contributions to these plans that have been possible for many years. The status of these contributions determines how they are treated in plan distributions:
1) Pre 1987 after tax contributions – these can be separately distributed if the plan accounts for them separately. If eligible for distribution starting in 2008 can be “converted” to a Roth IRA directly. Income limits apply until 2010. Regs yet to be issued.
2) Other after tax contributions – these can only be distributed on a pro rated basis with pre tax contributions and earnings. and starting in 2008 can also be “converted” directly to a Roth IRA. Income limits apply until 2010.
3) Roth account contributions and earnings- these have been available since 2006 and are held in a separate account from the pre tax portion of the plan, and can be transferred to a Roth IRA when eligible. Income limits do not apply to these contributions or transfers. Rather complex characterization of the status of these amounts in the Roth IRA have been issued in the Regs for defining taxation if Roth IRA distributions follow.