rollover 401(k) to a Roth IRA?
We have a participant of a 401(k) plan that is still employed with the company…the company does allow in-service withdrawals at the age or 50. The participant would like to do a partial distribution and rollover the distribution directly to his Roth IRA. I read somewhere that in order to do this the participant can not be working for the company anymore. Can you shed some light on this?
Permalink Submitted by Alan Spross on Wed, 2010-04-14 19:00
An eligible rollover distribution is not dependent on separation from service, although certain in service distributions such as hardship distributions or loan proceeds are not eligible for rollover. As long as the plan allows in service distributions that are not limited to those rollover ineligible types, there is no reason why a direct rollover to a Roth or traditional IRA cannot be done.
Some plans limit in service distributions to certain classes of plan assets based on the source of the contributions and also how after tax contributions are handled. The portion of an allowed distribution that is from after tax contributions will not be taxable in a direct Roth conversion.