No Pro-Rata Rule for TIRA Rollover to Employer 401k?
Hello,
I’ve found two forum postings here and 1 Kitces article that seem to indirectly answer this question as no, the rule does not apply, but I wanted to pose this specific question to the forum: Does the Pro-Rata distribution rule from traditional IRAs not apply when rolling money from a TIRA into an employer retirement plan?
Situation: Client has a $780k TIRA $165,000 of which is basis. Can the client roll the entire $615k of pre-tax earnings into their employer 401k without taking into consideration the pro-rata rule? Client has tracked all non-deductible contributions on form 8606.
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2019-05-14 16:28
Yes, in fact the client cannot roll any IRA basis in the 401k. The first dollars rolled into the 401k come from pre tax IRA money. This “special rule” is described in Pub 590 A in the Rollovers section. Tax code reference is 408(d)(3)(H).
Permalink Submitted by Bob Smith on Fri, 2019-05-17 14:17
Thank you, Alan.