Pre 1987 and Post 1986 after tax 401k contributions and splitting rollover to IRA and Roth IRA
Employee has 401k worth $2M which includes $500,000 of after tax contributions ($100,000 of Pre 1987 and $400,000 of Post 1986).
Employee retiring and will roll out entire balance – can they roll pre tax money $1.5to IRA and $500k to Roth IRA and pay no taxes?
I believe this is the case but want to make sure there is nothing different since some of the after tax is Pre 1987 and some is Post 1986.
Thanks as always
Howard
Permalink Submitted by Alan - IRA critic on Mon, 2021-07-19 23:50
Yes, with a proper Notice 2014-54 split rollover request, there will be no current tax due for these rollovers. After separation with a total rollover, the pre 87 split no longer matters. It would matter if the employee wanted to only roll the 100k out to a Roth IRA or take a distribution since the pre 87 amount can come out separately without pro rating and without earnings. Therefore, it might matter more if the employee was still working, but now that employee has access to the entire balance, the split rollover can be done with no current tax due.