Full Conversion to Roth of Plans with After-Tax Monies
I realize there have been dozens of postings over the past few years about the issue of PARTIAL conversion or SPLIT distributions of Qualified Plans with after-tax monies.
My question, however, seems more straight-forward, yet I’ve not found clear language: If someone wishes to do a FULL conversion to a ROTH, and the Qual Plan has both pre-tax and post-tax monies, may the conversion take place, presuming the person is willing to pay the taxes due on the pre-tax portion?
I’ve seen some “ideas,” but no factual reference to IRS code on this. Any help appreciated.
Permalink Submitted by Alan Spross on Thu, 2010-02-18 03:22
Sure, that can definitely be done and there have been various references to this in IRS Notices. There is no question about full distributions to either a Roth IRA or a TIRA when there are both pre tax and after tax amounts. Splitting these between the Roth and the TIRA is where the problem lies. Obviously, any after tax amounts would not be taxable for the conversion.
For 2010, this conversion could be reported equally in 2011 and 2012, just as if this were a TIRA to Roth conversion. If you then choose to recharacterize any of the conversion, the funds would have to go to a TIRA, as they cannot go back to the qualified plan.
Permalink Submitted by Matthew Clement on Thu, 2010-02-18 04:09
[b]An articulate and clear response. And precisely what I had believed. Thanks for confirming.[/b]