After Tax 401k Contributions
With after tax 401k contributions, can this amount be transferred into a taxable brokerage account?? What is the tax implication. Would it be better to roll into a separate Ira rollover account?
With after tax 401k contributions, can this amount be transferred into a taxable brokerage account?? What is the tax implication. Would it be better to roll into a separate Ira rollover account?
Permalink Submitted by Roger Kruse on Mon, 2008-07-14 19:11
There is no limit to the amount of after tax 401k contributions one can roll into an IRA. The smart move is to rollover the pretax funds and take the before tax funds out of the plan.
Permalink Submitted by Geoffrey Kasher on Mon, 2008-07-14 19:12
His plan allows for separate distributions. Can I roll out the post tax into a Roth (his agi will be less than 100k) and then in a separate distribution roll out the pre-tax into an IRA?
Permalink Submitted by Alan Spross on Mon, 2008-07-14 22:01
Notice 2008-30 leaves some of this detail up in the air and subject to assumption:
What seems clear:
1) Any pre 1987 after tax contributions can be distributed separately and therefore should be transferrable directly to a Roth IRA. Alternatively, they could be distributed to a taxable account or rolled over to a TIRA, from which a conversion could be done. The taxation would be then be based on the pro rate rules, whereas the direct Roth conversion would be tax free.
2) Other after tax contributions can only be distributed by a QRP on a pro rate basis with pre tax contributions.
What has not been confirmed:
1) In regard to 2) above, a direct Roth conversion could be done of the entire amount, but does a split between Roth for the after tax and TIRA for the pre tax require simultaneous transfer? The plan would then have to offer more than one transfer to different accounts.
2) Or can this be done at different times within the same year, again assuming the plan will transfer to more than one account.
There are many who assume the split transfer can be done given income eligibility, and if so this the faster and more efficient way to convert the funds to a Roth IRA without any current tax bill.
Permalink Submitted by Geoffrey Kasher on Mon, 2008-07-14 23:21
what about post 86 monies that are post tax?
Permalink Submitted by Alan Spross on Mon, 2008-07-14 23:52
That’s what my first #2 above refers to, and the rest of the comments after that.
If they must come out pro rated with pre tax amounts, it appears that it would take a split transfer on the same day in order to get the post tax to a Roth and the pre tax to a TIRA.