Seems odd that the original account was all after tax funds. But if this account is still held by the original employer plan, any amount converted would be on a pro rated basis between pre tax and after tax amounts unless there are pre 1987 after tax funds specifically allocated in the plan. This might be the case since the award is at least 20 years old.

Pre 1987 after tax contributions are eligible for distribution separately, ie. the pro rate rule does not apply to them, so they could be converted tax free.

But for amounts not allocated as pre 87, client can still escape the pro rate rules by doing a full distribution which would be short 4,600 for mandatory 20% withholding. Client could then replace the 4,600 and roll 23k to a traditional IRA, and finally roll the remaining 40k to a Roth IRA tax free. If client does not have funds to replace the withholding, the 4,600 would be assigned pro rate between pre tax and after tax, and the balance could be rolled over to the various IRA accounts.

Accordingly, some research needs to be done regarding any pre 87 funds.

• Flag as spam
• Log in to Reply