In service distribution
I have read the previous postings on roth conversions with 401k and AT dollars. I am familiar with with notice as well. All the examples I have seen, seems to be after separation from service and when pre and post dollars come out of the plan either by one or two checks or one or two 1099Rs.
Is is possible while working to take an in service distribution (assuming the plan allows it) of JUST the AT dollars plus earnings which the plan is tracking and convert the AT account to a roth? I’ve heard some experts say that this would still fall under a pro rata rules with the remaining assets let in the 401k plan. That would seem odd and would like your thoughts.
Thanks.
Permalink Submitted by Alan Spross on Tue, 2010-05-11 20:54
I agree that pro rating amounts that are NOT distributed is odd and unworkable. Therefore, If a plan provides for distributions of a certain class of contributions and/or earnings, the pro rate rules only apply to the character of the amounts allowed to be distributed. Otherwise, the plan accounting would never match up with the 1099R documents used by the taxpayer to file their return.
A plan should always complete the 1099R to reflect the amounts actually distributed as specified in the plan document, and the IRS depends on plan administrators to properly reflect the plan provisions on the 1099R forms.