Question regarding transfers from Georgia Defined Contribution Plan (GDCP)

Submitted by Matt Goyen on Thu, 2018-03-08 15:24

Contributions go in on an after-tax basis and interest earned is taxable unless you elect to rollover the earnings to an IRA. We are able to transfer the after-tax contributions of the plan to a Roth IRA, but my question is would this be considered a ‘transfer’ to the Roth IRA or would it be considered a conversion?

The concern is if it is considered a conversion the client would be subject to prorata rules based on existing IRA balanced, where if it is a transfer that would be avoided.

Thanks in advance.



Submitted by Alan - IRA critic on Thu, 2018-03-08 16:22

  • The movement of funds would be a direct rollover, and per Notice 2014-54 could be done as a split direct rollover with gains going to a TIRA and the after tax contributions to a Roth IRA as a “qualified rollover contribution”. A conversion technically is from a TIRA to a Roth IRA. Since a qualified rollover contribution directly from a non IRA plan to a Roth IRA goes directly to the Roth IRA, any balances in a non Roth IRA are immaterial and to not trigger pro rating.
  • If frequent direct rollovers out of this plan can be done, there will be only a small amount of earnings in the plan. If the earnings are quite small, it is simpler to directly roll the entire balance to a Roth IRA, and pay tax on the small amount of earnings rather than requesting a split rollover. 

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