Aftertax dollars (60 day rollover)
Good Afternoon
I am hoping for guidance on the following fact pattern:
FACTS:
401(k)participant recv’d two checks (made payable to him) (1) pre-tax and (2) aftertax (basis only)from his former employer.
Question
I know he can rollover the pre-tax dollars (check)#1 into a T-IRA.
Is he permitted to faciliate an indirect(60-day)rollover of the aftertax dollars (check #2) into a Roth IRA?
Thank you!
Permalink Submitted by Alan - IRA critic on Wed, 2013-08-14 23:17
Yes, this is safer than trying to accomplish this with direct rollovers, because Sec 402(c)(2) of the tax code provides for it. But he must have the cash to replace the 20% of the pre tax distribution that was withheld. He must do the rollovers in a specific order, first the pre tax amount to the TIRA and after the TIRA has received the rollover, then do the rollover of the after tax amount to the Roth IRA. He must replace the 20% withholding in order to complete the full plan rollover.