Roth 401k Roll-over to Roth IRA

Submitted by Mark Hilton on Tue, 2019-03-05 03:08

I have worked for my current employer since 2010. I have been contributing to a Roth 401k plan since that date, with no regular 401k contributions. I have received matching funds for my contributions. Neither I nor my employer has paid tax on the matching funds; however the total balance is shown as a single balance…no indication of a regular pre-tax 401k balance. There is a note stating the amount of employer contributions. I will retire in a month; & I am trying to imagine how the total balance will be divided, between my contributions & related earnings, & the company matching funds & related earnings. I have been dumb & happy thinking my Roth 401k balance could be rolled in total to a Roth IRA, with no taxes to be paid. Is this a common situation; or should I be worried that the IRS will want to tax everything again? (I think the company should have either paid tax on the matching funds, or else set up a separate taxable account).



Submitted by Alan - IRA critic on Tue, 2019-03-05 03:37

  • Unfortunately, this is a common situation due to deficient 401k statement breakdowns. Legally, your plan must maintain accounting breakdowns of all the categories you mentioned and more. I would press them to supply this information to you,  so you could check it before you undertake direct rollovers.
  • In most cases you would request a direct rollover of your Roth 401k balance to your Roth IRA. This will have it’s own H coded 1099R. None of this rollover is taxable, and Box 5 should report your contributions to the Roth 401k which you will use for your Roth IRA accounting (unless your Roth IRA is qualified).
  • The rest of your plan is pre tax and you would request a direct rollover of that balance to your TIRA account. Again, no current taxes due.
  • I assume that you do NOT want any of your non Roth IRA pre tax dollars rolled into your Roth IRA. You could do so if you wanted, but it would be 100% taxable. 
  • The major error to guard against is that NONE of your Roth 401k dollars end up in your TIRA. The plan should make one direct rollover check to your Roth IRA and the other to your TIRA so your IRA custodian knows how much goes where. But you still should know the figures, otherwise you will have no idea of the correct amounts going to each IRA type.
  • Most of these direct rollovers come off without a hitch. But you wouldn’t know because you are not being provided with a breakdown of the balance in each of the plan’s sub accounts. I would press them for that breakdown. I assume at the end of each year you are provided with this same insufficient plan statement.

 

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