New Roth Rollover Rules
I just found out that as of 1/1/08 a 401k participant can take an in service withdrawal (plan permitting) and rollover the before tax to a rollover IRA [b]and any after tax [/b]which would come out ie. 50k can be rolled over to a Roth IRA within 60 days and a contribution (income permitting) can be made as well. Is this correct? assuming plan administrator doesn’t allow a trustee to trustee transfer of the after tax, and the participant gets a check from the plan payable to themselves, does the new law permit it to be done this way without any obvious consequences? Can someone please elaborate on this so I don’t do something wrong and hurt the client….
Permalink Submitted by Alan Spross on Thu, 2008-03-27 21:35
This is a key issue with respect to PPA Sec 824. From the attached link to Notice 2008-30, you can see that this question was not directly addressed, nor are reporting provisions and that’s disappointing. That leaves most thinking that what you propose can be done, at least if both distributions from the plan occur on the same day.
I think I would be inclined to wait for further IRS guidance on this matter, ie how the receiving Roth custodian is going to report the incoming contribution on Form 5498 as a rollover but not as a conversion.
http://www.natptax.com/n200830.pdf