2008 Rollover Rules

[Guest Chaphill]

I am contemplating rolling over my 401k assets into a Roth IRA and a traditional IRA. My 401k contains both qualified (taxable) and non-qualified (already paid taxes) assets. My 401k administrator will issue separate checks when I roll them over. If I understand the new rules for 2008 (and that's a big IF), I can roll the qualified monies into a traditional IRA and the non-qualified monies into a Roth IRA. I'm also thinking that both of these transactions will just be rollovers not subject to any current taxation in 2008.

Am I correct in my interpretation of the new rules for 2008? Am I ignoring any other consequences? Are there any other things to be aware of with this proposed transaction?

Thanks in advance for any help!

[masteff]

My 401k contains both qualified (taxable) and non-qualified (already paid taxes) assets.

Am I correct in my interpretation of the new rules for 2008? Am I ignoring any other consequences? Are there any other things to be aware of with this proposed transaction?

First, have to be careful about what you mean by "non-qualified" since that is a jargon term in retirement plans area. Do you simply mean that these are after-tax monies (versus pre-tax monies)? Do you mean that you've been making Roth contributions in your 401(k) (which a few plans started when it recently became available)? Or does your company benefits department specifically call it a "non-qualified" retirement plan (meaning it's not a qualified plan under the IRS Code)? If it's the last, then I'd have to see the IRS's guidance before I could answer it.

Otherwise, in general, yes this sounds correct. We'll have to wait for the IRS to publish guidance before we can be 100% certain. Keep an eye on IRS publication 590; the 2007 version will likely mention the new rules in the "coming changes" section at the front of the pub. Also, around the first of the year, the IRS should come out w/ a new model for the "Special Tax Notice" which you can request from your plan administrator; this notice contains useful information about retirement plan rollovers.