Rolling Form 8606 contirbutions to 401-K Roth?
Client has a Roth 401-K at his company. He is 80% owner with a 20% partner therefore he can modify plan as needed.
Question:
Client has $375K in IRA and $1M in profit sharing and $150K in Roth 401-K.
Client has Form 8606 showing his after tax contributions as $60K.
Assuming client can modify the plan as needed can he roll over this $60K into his Roth 401-K plan so that he avoids the coffee and cream rule later on?
You feedback is appreciated.
Bill
Permalink Submitted by Alan Spross on Mon, 2012-02-20 19:02
No. IRA funds cannot be rolled into a designated Roth plan.
However, if the qualified plan can accept IRA rollovers, he should transfer the 315k pre tax IRA balance into the pre tax profit sharing plan. That will leave only the 60k in after tax basis in the IRA, which he can then convert tax free into a Roth IRA. He would not have a TIRA at that point, but that would also set him up to make non deductible TIRA contributions every year and immediately convert them tax free to his Roth IRA. There would be no pro rating involved.