K-t-F

Pooled investment account (with ROTH)

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I have an attorney who has continually asked if it is acceptable to co-mingle ROTH contributions with regular salary deferrals in a single investment account.  I informed him that it is acceptable as long as you keep each source separated when performing the annual accounting meaning...   as long as you allocate earnings proportionately. 

Does anyone have an IRS cite saying that is an acceptable practice?  That is what he is looking for.

Thanks

Edited by K-t-F

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Normally I am chary about this response, but the lawyer asked for it:  This is an accounting issue, not a legal issue; you won't understand.  And there is no citation.

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Agree with QDROphile. I suppose you could give him 1.401(k)-1(f)(3) as a citation - at least it does discuss the fact that gains, losses, etc. must be separately allocated to the Roth account on a reasonable and consistent basis. If physically separate accounts were required, such language would be unnecessary. But if he hasn't understood this already, you will probably be beating a dead horse anyway.

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Ditto QDROphile and Belgarath.  Recordkeeping and investing are totally different concepts.  And for the record, every recordkeeper I've been associated with uses "omnibus" trading accounts commingling all sources for all plans into "one" account as far as the investment provider is concerned.  From an investment provider's perspective, they only saw ONE account in the name of the recordkeeper and had no clue how many different plans, the number of participants involved, or the "sources" of the money involved.  Indeed, if they are mutual funds, one recordkeeper I worked for bundled ALL client accounts (retirement plans, individuals with brokerage accounts, and "other") into a single trading account with mutual funds (they called it their "mutual fund marketplace").  Even with CIT's, everything was omnibus - except only "qualified" money was involved (and Roth is still "qualified" money when held in a plan).

Edited by MoJo

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And consider 26 C.F.R. section 1.402A-1's Q&A-13.

https://www.ecfr.gov/cgi-bin/text-idx?SID=2f15788783ead36e79e54a376e3afcb7&mc=true&node=se26.6.1_1402a_61&rgn=div8

That this rule against "transferring value" from non-Roth accounts to Roth accounts refers not only to a "transaction" but also to an "accounting methodology" suggests that non-Roth and Roth accounts may share an investment if the accounting among the subaccounts of a participant's account is fair.

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