401k company stock with Roth conrtribution and NUA treatment

Submitted by abraham boznick on Fri, 2024-01-12 04:49

I have had 401k where I contributed a combination of pre-tax and after tax money (ROTH) into my company stock in my 401k. Now, I would like to convert all my 401k into regular IRA and stock brokerage account (for company stock in 401k using NUA option). Note I am over 59.5 and never took anything out of my 401k in the past. However, since part of my company stock in my 401k were funded through the ROTH contributions — it should not be taxable after conversion. How can I separate my ROTH portion of the company stock to avoid paying tax on the ROTH part of my NUA distribution of the company stock when it is converted into the brokerage account?



Submitted by David Mertz on Fri, 2024-01-12 12:25

  • The nature of your question makes me wonder if your after-tax contributions were really Roth contributions since after-tax contributions are not necessarily Roth contributions.  The Roth portion of your 401(k) is required to be held in a designated Roth account separate from the rest of the funds in your 401(k), so you would simply roll the entirety of the designated Roth account over to a Roth IRA.  The company shares held in the designated Roth account could be rolled over to the Roth IRA in-kind or sold and the cash rolled over.  You are not permitted to roll over any portion of a designated Roth account over to a traditional IRA.
  • You would apply NUA treatment to only the company stock held in the traditional 401(k) account and roll the remainder of the traditional account, if any, over to a traditional IRA (or if you have after-tax basis in the traditional 401(k), possibly do a split rollover with some or all of the after-tax basis going to a Roth IRA).

Add new comment

Log in or register to post comments