termination of Roth 401(k)
Our 401(k) plan has been terminated. In the case of termination I believe that the Roth 401(k) can be rolled into a Roth IRA without taxes or penalties if held less than 5 years. Is that correct?
Many thanks as always
Our 401(k) plan has been terminated. In the case of termination I believe that the Roth 401(k) can be rolled into a Roth IRA without taxes or penalties if held less than 5 years. Is that correct?
Many thanks as always
Permalink Submitted by Alan Spross on Wed, 2012-10-24 04:33
First, here is some IRS information on terminated plans.
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/401(k)-Resource-Guide—Plan-Participants—Plan-Termination
When you are able to take your lump sum distribution, your Roth 401k balance can be directly rolled over to a Roth IRA without any tax or penalty. You then need to determine how this balance will be treated in your Roth IRA. If your Roth 401k was not held for 5 years, the holding period is determined by your Roth IRA age. Your breakdown in the Roth IRA results in your Roth 401k contributions being considered as regular Roth IRA contributions, and any earnings as Roth IRA earnings. If your Roth 401k has lost money, your Roth IRA basis of regular contributions is the amount you contributed to the Roth 401k, not the value of the plan when you do the rollover. This figure will be shown on the 1099R issued by the plan reporting the direct rollover.
If you previously had a Roth IRA, the Roth aging also applies to the Roth 401k funds rolled over.