For many years, plan administrators have been doing direct rollovers to a TIRA of the pre tax amount and cutting a check to the employee for the after tax amount. Two 1099R forms are issued, one coded G for the direct rollover and the other showing no taxable amount.

With the advent of direct Roth conversions, we now have a debate over how to avoid the pro rate rules for the Roth conversion as well as the pre tax rollover to a TIRA, and that also sparks questions about how your distribution would be handled.

There is no doubt that if you receive a total check and then roll over the pre tax amount yourself, that the pre tax amount will all end up in the TIRA and the part you keep will be tax free. However, you would run into 20% withholding on that pre tax amount if you do not do a direct rollover. For that reason, I would still suggest doing a direct rollover of the pre tax amount and avoid the withholding. Confirm that the plan will send you a separate 1099R on the after tax amount showing nothing taxable, and you should have no problem.

I assume you no longer work for this company and are therefore entitled to a full lump sum distribution.

Note: if you have highly appreciated employer stock in the plan, you might also want to consider NUA potential.

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