After tax dollars in a Qualified plan

Good morning…I was hoping to get some guidance in regards to:

If a qualified plan contains after-tax dollars, how could/should they be handled?



When retiring?



In the current situation the client is 57 not but not retiring until 62. Is it as simple as rolling over into an IRA and keeping track of after tax for future pro-rata withdrawals?



Check with the plan provisions with respect to in service distribution provisions. He may not be able to get access to the funds until he separates from service or perhaps turns 59.5.

When he can receive (non hardship) distributions, he has many choices:
1) Have the after tax amounts go to a taxable account and pre tax to a traditional IRA
2) Roll the after tax over to a traditional IRA and file Form 8606 to report the added basis.
3) Transfer the pre tax to a traditional IRA and directly transfer the after tax amount to a Roth IRA – this provision is new this year and may depend on pending IRS rules or limits on the # of transfers the plan will do.
4) If there are any pre 1987 after tax amounts separately accounted for on his statement, he can transfer those to a Roth prior to taking any other distributions, or he can distribute them to himself prior to the other amounts.



That is very helpful…thank you so much!!!



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