408B to Roth IRA
we have a client that has a 408B and wants to roll that into her Roth IRa
is that doable?
She says it is after tax contributions in the 408B.
please let me know if this allowed.
we have a client that has a 408B and wants to roll that into her Roth IRa
is that doable?
She says it is after tax contributions in the 408B.
please let me know if this allowed.
Permalink Submitted by Alan Spross on Wed, 2011-02-09 17:51
If you mean 403b (not 408), distributions can be directly rolled to a Roth IRA, and only the pre tax amount would be taxable.
If any of the contributions are pre 1987 after tax contributions, they can be separately converted, but other after tax contributions come out pro rated with pre tax.
Permalink Submitted by Shahpar Naghshineh on Wed, 2011-02-09 17:53
it is 408B and not 403b. I have a statement here that has title 408B. Do you know anything about it ?
Permalink Submitted by Alan Spross on Wed, 2011-02-09 19:11
It would be an IRA Annuity. 408(a) covers non annuity IRA accounts and 408(b) covers IRAs that are held as an annuity. IRA tax rules trump annuity tax rules.
Therefore, an IRA annuity can be converted to a Roth IRA annuity. Basis would be tracked on Form 8606 just like any non annuity IRA meaning that a Roth conversion would be only partly taxable. Note that the IRS has published rules regarding proper valuation of these IRA annuities for conversion purposes. Certain fringe benefits and/or high death benefits may need to be considered in addition to the current redemption value of the IRA annuity. But the insurance company will have to provide that figure. For example if the redemption value is 100k and IRA owner has 20% basis on Form 8606, but insuror indicates the conversion value to be 120,000, then the taxable portion of the conversion would be 80% of 120,000.
Permalink Submitted by Shahpar Naghshineh on Wed, 2011-02-09 22:10
thank you. this was a big help. so Annuity IRA can not be moved into a regular IRA.