401a rollout to Roth 5 year clock

Submitted by Patrick Viglotti on Wed, 2017-11-01 18:45

Client has contributory Roth opened over 5 years ago. Rolling out 401a to Roth in 2017. Does the 5 year clock from the original contributory Roth count for the new 401a rollout?



Submitted by Alan - IRA critic on Wed, 2017-11-01 19:24

  • Yes, it will count with respect to Roth earnings being qualified and tax free. Client must also be 59.5 for the Roth IRA (and the rollover into it) to be fully qualified.
  • If not yet 59.5, then the 401a rollover will be treated the same as a Roth conversion done in 2017 and it will have a 5 year holding period (or until 59.5 if sooner) before it can be distributed without a 10% penalty. This 5 year holding period is totally different than the one above. 

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