AFTER TAX CONTRIBUTIONS AND ROLLING INTO A ROTH
Client has after-tax contributions to a savings plan. The account has been rolled over into an IRA. Custodian has kept records of the after-tax.
My understanding is that the after-tax contributions can be rolled into a Roth.
Questions: can the Roth R/O still be done if the client moved the account from the employer plan to an IRA? After the money is rolled over, is there a waiting period (such as 5 years) before the Roth assets can be removed tax-free?
Thank you.
Ken Kaszak
Permalink Submitted by Alan - IRA critic on Fri, 2019-12-06 19:12
Once after tax retirement plan amounts are rolled into a TIRA, the pro rate rules of Form 8606 are triggered. As such the only way to convert only the after tax amount tax free is to roll all pre tax TIRA amounts into an accepting employer plan. If the client converts from the TIRA as is, a pro rated amount of the pre tax balance in the TIRA accounts will be taxable. In other words, client should have done a split rollover from the savings plan, sending the after tax amount directly to a Roth IRA, not to the TIRA.