tax & coffee Posted June 21, 2016 Report Share Posted June 21, 2016 Mandatory employee contributions to a governmental 401(a) DB are after-tax. If an employee separates from service prior to becoming fully vested, they may elect to take an ERD of after-tax employee contributions (no employer contributions or earnings). Is the employee permitted to initiate a direct rollover to another eligible plan or IRA of these solely after-tax employee contributions? Link to comment Share on other sites More sharing options...
Lou S. Posted June 21, 2016 Report Share Posted June 21, 2016 I believe the answer is yes, though I do not believe the answer has always been yes. This may be help for you https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans Link to comment Share on other sites More sharing options...
mctoe Posted June 22, 2016 Report Share Posted June 22, 2016 I believe the answer is yes, though I do not believe the answer has always been yes. This may be help for you https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans The cited link indicates that isolating the after-tax only is not permitted. It appears the pro-rata rule would apply. Link to comment Share on other sites More sharing options...
tax & coffee Posted June 22, 2016 Author Report Share Posted June 22, 2016 How would the pro rata rule apply in a scenario where the only amounts eligible to be rolled out are after-tax monies? The pre-tax earnings remain in the Fund due to the employee lacking sufficient creditable service to vest in employer contributions and any attributable earnings on in the Fund. Link to comment Share on other sites More sharing options...
Belgarath Posted June 22, 2016 Report Share Posted June 22, 2016 It wouldn't. Assuming there is nothing to distribute other than basis (after tax employee contributions) then there is no pro-rata. I make no statement as to whether it is permissible to pay zero interest on the accumulated employee contributions - that's a separate question, which some of the DB experts can doubtless answer. Link to comment Share on other sites More sharing options...
mctoe Posted June 22, 2016 Report Share Posted June 22, 2016 After reviewing the link provided in the previous post again it doesn't answer your question. 2014-54 also does not appear to answer your question. I guess a question could be asked of whether any interest was earned on the after-tax employee funds contributed? I see your point regarding the pro-rata rule; there is no ERD of other money. Link to comment Share on other sites More sharing options...
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