Conversion from P/PS into a Roth
I have a 401k/Profit Sharing plan and inside of that plan I also have a Roth 401k. I maximize the contirubtion to the Roth 401k and then maximize contribution to the profit sharing plan.
Question?
Can I convert a portion of my 401k/Profit Sharing plan (say $250K of a $750K value) directly to my Roth 401k plan and then use other funds to pay the tax on the conversion?
Note: I am still working and will continue doing so for 7-8 more years.
As a FYI,I also have an IRA (Which is sperate from the money listed above) balance worth $300K with a $50K basis. I know about the coffee and cream rules and know that if I do a direct conversion of the IRA that I would pick up $250K of income.
I don’t think this has any bearing on my question above but your thoughts along these lines would be appreciated.
Bill H.
Permalink Submitted by Alan Spross on Wed, 2010-06-09 19:37
Bill, you are correct that your current IRA account does not affect your qualified plan options.
Presently, you cannot convert within a qualified plan from the pre tax account to the designated Roth account. The designated Roth account can only receive new salary deferral contributions. However, there is some pending legislation in Congress that will allow conversions within the qualified plan in certain circumstances, possibly only after separation from employment, so stay tuned for further developments on that front.