Roll Over of Taxable money
I have Pre tax and after tax funds in my qualified plan. The pre tax is about $800,000 and after tax $200,000. I want to move the funds into a traditional IRA. The sponsor will do a direct trustee to trustee transfer of th e$800,000 to my IRA but for the $200,000 after tax they will only issue me a check in my name. Can I take this after tax money and roll it to my ira within 60days. My goal is to get all $1,000,000 into my IRA
Permalink Submitted by Alan Spross on Mon, 2008-09-22 20:54
Yes, you can roll it over to your IRA and file Form 8606 to report the added basis in your IRA.
However, effective this year, if your modified AGI is under 100,000, you can convert directly to a Roth IRA from your employer plan. Being able to transfer that 200,000 directly to your Roth is much more tax efficient than applying only a small portion of your basis in future TIRA distributions or conversions. The IRS has not yet fully clarified some aspects to this direct Roth conversion, but it would require your plan to offer more than one transfer, as well as the IRS agreeing that the pre tax amount can go to the TIRA and the after tax amount to the Roth. Some financial people assume this will be OK, but I would avoid making this move until such clarification was issued. You might ask the plan about this option, just to see what they say, but they apparently do not recognize this at this point. As such, perhaps waiting to do the transfer until Regs were issued could pay off much more than rolling the entire plan to a TIRA.
You should also determine if there are any highly appreciated employer stocks in the plan, for which NUA should be considered as part of a qualified LSD.