Roth 401K to a Roth IRA Basis

Submitted by Keith Kim on Wed, 2018-01-17 03:39

Hello,

If the Roth 401k is rolled over to a Roth IRA, is the basis for distribution purposes the rolled over amount?
or the original contribution she’s put in?
Also, the roth ira is less than 5 years old and the owner is only 45. What amount from the roth ira can be taken out as cost basis or contribution?
Thanks!



Submitted by David Mertz on Wed, 2018-01-17 13:22

  • Unless the account owner had reached age 59½ and had met the 5-year holding period in the Roth 401(k), at least one of which is not true in this case, only the original contributions rolled over from the Roth 401(k) to the Roth IRA become contribution basis in the Roth IRA.  If any amount in the Roth 401(k) came from an In-plan Roth Rollover, that portion becomes conversion basis in the Roth IRA, subject to the 5-year holding period for conversions.
  • The amount that is basis in the distribution from the Roth 401(k) is generally shown in box 5 of the code B or code H Form 1099-R reporting the distribution from the Roth 401(k).

Submitted by Alan - IRA critic on Wed, 2018-01-17 18:47

I agree, and to further clarify a rollover with a loss, the Box 5 amount will exceed the amount actually rolled over and the Roth IRA will acquire regular contribution and/or conversion basis from Box 5. That said, Box 5 cannot break out the elective deferral basis from the IRR basis, the total IRR amount in the last 5 years does not break out these amounts by year or by taxable/non taxable IRR amounts, therefore the 1099R is only partially useful for Roth IRA accounting purposes. In these cases, the Roth owner will need to develop the actual breakdown from plan statements, prior 1099R forms etc and this isn’t likely to get done with the average taxpayer. The IRS needs to button these things up if they want proper Roth IRA 8606 reporting. Of course, most taxpayer are probably able to delay Roth IRA contributions until their Roth is qualified and if so they can forget this complex recordkeeping.

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