Custodian error for After-tax 401k conversion

Submitted by Bob Smith on Mon, 2016-10-03 20:12

I think Fidelity made an error for my 401k rollover to an IRA in 2015, and I just caught it now when working on taxes and examining my 1099-r and 5498 forms.

What’s the best way to fix this? I have not yet filed taxes for 2015, and the deadline is Oct 15.
I believe that when I did the rollover, (May 2015) Fidelity swapped my standard employee contributions for my after-tax contributions!

Fidelity 401k contained:
~19k employee contributions
~30K Post-86 After-Tax
~23k Employer Match
~11k Roth 401k

I told Fidelity I wanted to roll over my 401k funds, intending to put roth/after-tax contributions into a Roth IRA, and Employee contributions/employer match/after-tax earnings into my IRA.
Fidelity issued me 3 checks, which (not paying enough attention) transferred into betterment as following:

53K – Combination of after-tax and the employer match. —> Trad IRA
19K – The employee contributions —> Roth IRA
11K – From the roth —> Roth IRA

Looking at my 1099-R’s, I have one with distribution code G that includes
1) Gross distribution – 72K
5) Employee contrib/roth contrib = 19K (I’d expect to see 30k here to match my after-tax contributions)

(the roth 1099-r with distribution code H looks correct)
1) Gross – 11K
5) 7K.

Any help would be greatly appreciated!
I’d love to have it all sorted out with after-tax contributions correctly in my roth, and avoid any issues with the IRS!



Submitted by Ben Meyer on Mon, 2016-10-03 21:41

  • From the checks issued and the forms 1099-R Fidelity is saying that your after-tax voluntary contributions were $19K, and the total of your pre-tax elective deferral contributions, company match, and all earnings on your traditional 401(k) plan was $53K.  It looks like they issued separate checks pursuant to IRS Notice 2014-54, which permits them to write separate checks for pre-tax balance and after-tax contributions.  If the balance of the after-tax sub-account was around $30K, that may have been the total of your after-tax contributions and the earnings, both of which would stay in the same sub-account.  Therefore, the forms 1099-R look correct.
  • For your tax, you report the total of the rollovers ($83K) on form 1040 line 16a, put 0 (zero) on line 16b, and write “ROLLOVER” on the blank space on line 16.  You have three separate rollovers, none of which are taxable for 2015.  The checks should have been payable to the successor IRA custodian(s) and marked “FBO your name”. 


Submitted by Ben Meyer on Mon, 2016-10-03 21:59

Also, the due date for a federal tax filing this year under an extension is October 17, since the 15th falls on a Saturday. 



Submitted by Alan - IRA critic on Mon, 2016-10-03 22:54

There appears to be an inconsistency here, but it is not clear whether the error is on the 1099R or your description of the breakout of dollars in the plan. Possibly what you describe as 19k employee contributions are actually pre tax elective deferrals (employee contributions are after tax). Check the 5498 forms and advise how much went into the Roth IRA and how much to the TIRA. Nothing in box 2a on the G coded 1099R?



Submitted by Bob Smith on Mon, 2016-10-03 23:50

It looks like the error was on my description/amounts of breakout dollars.  

  • I was looking at the source transaction history on fidelity’s website which broke out the dollar sources incorrectly.  
  • Once I manually added up all the contributions myself, everything started making much more sense.  
  • My after tax voluntary contributions were indeed 19K.
  • Quick Q:  Should I expect to have my 5498 forms match my 1099-r’s?  I was expecting to see box 1 on my 1099-r’s match up with box 2 on my 5498 forms, but my understanding might be incorrect.  My naive assumption would be that the roth and the after-tax 401k contributions would be coded H on the 1099-r, and the rest G. 
  • My 5498 forms:
  • 5498 traditional:
  • 53K Rollover contributions.
  • 5498 Roth – 
  • 30K rollover (19k+11k)
  • Checks were made out to the IRA provider, marked FBO.  Box 2a is marked $0.00 in both 1099-r’s


Submitted by Alan - IRA critic on Tue, 2016-10-04 00:13

  • The H coded 1099R is correct, as only direct rollovers from a desigated Roth are coded H. Rollovers from non Roth accounts are coded G.  The 5498 forms will show the actual amounts rolled into the 2 IRA types as Rollover contributions. The total Box 1 of all 1099Rs should add up to the total 5498 contributions.
  • If your intent was that the Roth plus the after tax portion of the pre tax account go to the Roth IRA (the most beneficial result), and the pre tax totals go to a TIRA, there would be no current taxes shown in Box 2a. 42,000 would have been rolled to the TIRA and 41,000 to the Roth IRA. Box 5 of the G coded 1099R would show 30,000. Do these figures match up to what you have? If not where are they different?


Submitted by Ben Meyer on Tue, 2016-10-04 01:05

The following is a summary of what has been posted:

DISTRIBUTIONS:
53K – Combination of elective deferrals, employer match, earnings (all pre-tax). —> Trad IRA
19K – The employee after-tax contributions —> Roth IRA
11K – From the Roth 401(k) —> Roth IRA
30k TOTAL TO ROTH IRA
83K TOTAL DISTRIBUTIONS

FORMS 1099-R:
CODE G: (From non-Roth 401(k))
  1) Gross distribution = 72K (=53K+19K)
  5) Employee contributions = 19K
CODE H: (From Roth 401(k))
  1) Gross distribution = 11K
  5) Designated Roth contributions = 7K
83K TOTAL OF BOX 1 OF BOTH 1099-R

FORMS 5498:
5498 Traditional non-Roth: 53K Rollover contributions.
5498 Roth: 30K rollover (=19k+11k)
83K TOTAL OF BOTH 5498s

Therefore, it all seems to add up correctly. The after-tax contributions and Roth 401(k) went into the Roth IRA. The pretax went into the traditional IRA, so all seems correct.



Submitted by Alan - IRA critic on Tue, 2016-10-04 03:17

Benn is correct.  The 30k on the first post should have been listed as pre tax elective deferrals.



Submitted by Bob Smith on Tue, 2016-10-04 05:00

Benn’s summary is correct – everything looks good.  Now to enter it into turbotax.Thanks for your help! (Can I buy you a beer or something? 🙂



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