401k & IRA Contributions for 2012
What is the 401k contribution limit for 2012? Will it stay the same as 2011? What are the income limitations for converting to a Roth IRA or 401k for 2012?
What is the 401k contribution limit for 2012? Will it stay the same as 2011? What are the income limitations for converting to a Roth IRA or 401k for 2012?
Permalink Submitted by Alan Spross on Mon, 2012-01-09 21:03
Elective deferrals to a 401k, 403b or 457 plan have gone up by $500 in 2012. Basic limit is now 17,000 and the age 50 catch up is 5,500 as before. IRA contributions are still limited to 5,000 with an age 50 catch up of 1,000.
There are no longer ANY income limits to convert. The last year for the 100,000 income limit was 2009.
Permalink Submitted by Michael Stokes on Mon, 2012-01-09 21:29
What about the phase-out ranges or limits for IRA or Roth IRA deductibility? Any changes there?
Permalink Submitted by Alan Spross on Mon, 2012-01-09 21:39
Yes, small increases in those areas. See attached:
http://www.irs.gov/newsroom/article/0,,id=248482,00.html
Permalink Submitted by tg corrigan on Mon, 2012-01-09 23:07
My understanding is that if your 401k plan allows for post tax contributions and in service distributions you can roll those over into an IRA then convert to a Roth. As long as you only take out post tax contributions (and not any appreciation) there should be no tax consequence upon rolling the regular IRA into a Roth – is this correct?
Permalink Submitted by Alan Spross on Mon, 2012-01-09 23:28
Somewhat correct, but there are qualifications.
The plan must maintain a sub account under which current employees are only eligible to distribute the after tax contributions and their earnings. Partial distributions must be pro rated between the earnings and the contributions. And if there are other plan balances that could be distributed while in service, the pro rating must reflect those other eligible balances.
Therefore, if you are only allowed to distribute the after tax contribution account and do so when there are no earnings in it or do so periodically during the year before earnings can be generated, the distribution will be fully tax free. That distribution could be directly rolled from the plan to a Roth IRA tax free to avoid becoming part of your TIRA accounts and the pro rate rules of Form 8606. You could do a direct rollover to a TIRA first and convert it tax free only if this was your ONLY TIRA, SEP IRA or SIMPLE IRA account. If you had those other accounts you would get caught up in the pro rate rules of Form 8606.