After-Tax Contribution to a Roth IRA
Hi: Can a After-Tax Contribution, not a Roth Contribution source be rolled over to a Roth IRA from a 401k plan or must it be taken as a distribution? The amount is made up of cost basis and earnings that makes up the balance. Thanks!
Permalink Submitted by Alan - IRA critic on Tue, 2014-09-16 20:24
The after tax contributions to a 401k can be rolled either directly or indirectly to a Roth IRA, but an “isolation of basis” strategy must be used to limit the after tax amount to the Roth IRA. A typical after tax sub account in a 401k plan will include the earnings on the after tax contributions and together they can be distributed (when eligible) without pro rating with the rest of the 401k account. But the earnings can also be split out and directed to a TIRA while the contributions go to the Roth. Some methods of isolating basis are less risky than others.