Rollover of QRP after tax contributions to Roth IRA

For several months now, the challenge of rolling over pre tax amounts to a TIRA and after tax amounts to a Roth IRA has been debated. Notice 2008-30 did not shed any light on the main issue, which is the pro rata rules applying to each distribution from the QRP. The following is copied from p 4 of Notice 2009-68, just issued by the IRS and primarily dealing with the 402(f) notice requirement for QRP eligible rollover distributions.

It appears to confirm that the pro rate rules DO apply except for certain pre 1987 after tax contributions. This reinforces the assertion that the only way of getting the pre tax amounts to the TIRA and the after tax amounts into a Roth IRA is by doing indirect 60 day rollovers rather than direct rollovers. The 20% withholding would have to be replaced to complete the TIRA rollover.
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SPECIAL RULES AND OPTIONS
If your payment includes after-tax contributions

After-tax contributions included in a payment are not taxed. If a payment is only part of
your benefit, an allocable portion of your after-tax contributions is generally included in
the payment. If you have pre-1987 after-tax contributions maintained in a separate
account, a special rule may apply to determine whether the after-tax contributions are
included in a payment.
You may roll over to an IRA a payment that includes after-tax contributions through
either a direct rollover or a 60-day rollover. You must keep track of the aggregate
amount of the after-tax contributions in all of your IRAs (in order to determine your
taxable income for later payments from the IRAs). If you do a direct rollover of only a
portion of the amount paid from the Plan and a portion is paid to you, each of the
payments will include an allocable portion of the after-tax contributions. If you do a 60-
day rollover to an IRA of only a portion of the payment made to you, the after-tax
contributions are treated as rolled over last. For example, assume you are receiving a
complete distribution of your benefit which totals $12,000, of which $2,000 is after-tax
contributions. In this case, if you roll over $10,000 to an IRA in a 60-day rollover, no
amount is taxable because the $2,000 amount not rolled over is treated as being aftertax
contributions.
You may roll over to an employer plan all of a payment that includes after-tax
contributions, but only through a direct rollover (and only if the receiving plan separately
accounts for after-tax contributions and is not a governmental section 457(b) plan). You
can do a 60-day rollover to an employer plan of part of a payment that includes after-tax
contributions, but only up to the amount of the payment that would be taxable if not
rolled over.
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This is also confirmed in IRS Notice 2009-75 just released on Tax consequences of these distributions.



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