rolling after-tax contributions to annuity

[Guest mam]

A 53 year-old participant in a 401(k) profit sharing plan (a plan that also allows after-tax contributions)was told by his broker that he is able to roll the "pure after-tax contributions" into his annuity, and the earnings on those contributions into a qualified IRA. I don't think this is right, but I'm not sure. Also, since this plan has been in existence since 1984, I guess it's possible that pre-87 and post-86 somehow fits into this. Can someone explain this to me? And what exactly are this guy's options. thanks so much!

[Michael Devault]

The employee's after-tax contributions will be returned to him upon distribution without any income tax consequences, so he can do whatever he wishes with them, including purchasing a new annuity. Assuming the funds were not in an annuity before, there will be no division of pre- and post-TEFRA: the new annuity will be purchased currently, thus subject to LIFO taxation.

The earnings on the after-tax contributions are, indeed, eligible for rollover into an IRA when distributed from the plan.