After-tax contributions in 401(k) rollover

Submitted by Jan on Fri, 2021-09-24 15:35

Hello,

I’d like to rollover after-tax contributions in my 401(k) to a Roth IRA and the associated earnings to a Traditional IRA. I wanted to confirm that I can ONLY rollover the earnings generated from the after-tax contributions, i.e. I do NOT need to rollover the entire balance of my 401(k), correct? For example, the balance of 401(k) is $100k, after-tax contribution is $10k, the earning from the after-tax contribution is $3k, the rest of $87k includes pre-tax and Roth, I can rollover $10k to a Roth IRA and $3k to a Traditional IRA without tax impact, correct?

Thank you.

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Permalink Submitted by Alan - IRA critic on Fri, 2021-09-24 17:13

Yes, the after tax contributions and their earnings are maintained in a separate sub account within the 401k and these accounts can be distributed separately from the rest of the plan under IRS rules. It is possible that a plan could restrict the distributions, but that is rare. Be sure to specify that you are only asking for a split rollover of the after tax sub account. To avoid the risk of a direct rollover foul up, you might consider just moving the entire sub account to your Roth IRA and pay tax on the 3000 of gains. Be sure to do these rollovers this year, since a pending tax bill will eliminate the rollover of after tax dollars to Roth after 2021.