AfterTax 401K conversion to Roth IRA: Pro-rata rule apply?
When rolling over after-tax 401K funds to a Roth IRA, does the pro-rata rule apply If a client already holds a large pre-tax Trad IRA?
When rolling over after-tax 401K funds to a Roth IRA, does the pro-rata rule apply If a client already holds a large pre-tax Trad IRA?
Permalink Submitted by Alan - IRA critic on Wed, 2021-09-29 16:05
No. Since this rollover goes directly to the Roth IRA and not through a TIRA account, the pro rata rules do not apply except for within the after tax sub account. The distribution from the after tax sub account must include a pro rated amount of earnings on the after tax contributions within that account. But the TIRA balance is not taken into consideration, and a Form 8606 is not required to report the rollover.