Can after-tax money in a 401K plan be rolled over (NOT converted) to a

[Guest megsdad]

I attended a seminar in which the presenters said that by "rule 72t" I could take after-tax contributions from my 401K, and roll them over into a Roth IRA. I questioned them about this, and they said they would cover that later in the seminar, but they did not get back to it, and I did not get a chance to question them after the seminar was over.

I called Fidelity (my 401K administrator) and asked them about this. They said that I could do this type of rollover. I then called Waterhouse, where I have a Roth IRA, and asked them the same question. They said there was no such thing. I figure I can open a new Roth with Fidelity, and let them roll the after-tax money into that Roth (they said they could), and then transfer it to Waterhouse later, but I want to make sure its legal. I'm talking about moving roughly $15K, and I'm 42, so if it can grow in a Roth vs a 401K for 17 years, I thinks its a great deal.

All the searches I've made about rolling money into a Roth, find discussions on the conversion from a traditional IRA to a Roth. I cannot find anything "official" that says I can do what I'd like to do.

Does anybody know anything about this?

If there is any info, please e-mail me at megsdad@lucent.com

Thanks

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Mark Johnson

[Guest jsree]

i too would be interested in what the experts have to say about this. The 401K brochure at my company, Ericsson, says that after-tax employee contributions are not eligible for rollover when employment ends. But I am pretty sure the situation could be different elsewhere.

[BPickerCPA]

Let's take it one step at a time.

First of all, you CANNOT roll 401k money into a Roth IRA. The only money that can go into a Roth IRA is either the annual contribution (limit $2K per year) or an amount converted from a traditional IRA. So any money that is in a 401k MUST first go through a traditional IRA, before it can go into a Roth.

Second, after tax 401k money CANNOT be rolled into a traditional IRA. The law is very clear and specific that 401k money that would not be subject to income tax (read: after tax money) cannot be rolled into an IRA.

What you're left with, apparently, is a seminar presenter and someone at Fidelity who don't know what they're talking about. Sec 72(t) of the code talks about 10% penalty for withdrawals, and the exceptions thereto. Sec 72 has NOTHING to do with Roth IRAs. Those rules are all in sec 408A.

Where do these people get this stuff???

[BPickerCPA]

jsree,

The situation is NOT different elsewhere since the situation is defined by law.