In Plan Roth Conversion

[Lou S.]

Is the in plan roth conversion treated as an in-service distribution subject to the 5 year look back rule for top-heavy purposes or is it treated as a transfer to a related rollover source and inculded in the balance on the determination date?

[Belgarath]

In a purely gut reaction, having done no research whatsoever or even having given it any real thought, I'm inclined to wonder why it wouldn't just be considered part of the "normal" account balance? It's still part of the participant's plan account, and it isn't "rollover" money in the normal sense. I'd guess that it is not treated as an in-service distribution, nor a transfer. It's just included normally as part of the normal account balance.

[ETA Consulting LLC]

One reason is that it would be tracked with any other amounts from outside Roth arrangements that may have been rolled over into the Designated Roth Account. These amounts, unlike regular Roth Amounts, will not be subject to any withdrawal restrictions and, therefore, treated as if they were rollovers.

If someone is eligible for a withdrawal from Profit Sharing at age 35 (for instance) converts their profit sharing into the designated Roth Account, they would not be restricted from a subsequent distribution of that amount prior to age 59 1/2 because it is an amount that was rolled in and previously free of any withdrawal restrictions.

This is a good question. Just can't wait to see what the final regulations are.

[Lou S.]

The participant does get a 1099-R for income and it is treated as a distribution for that purpose so I'm inclined to treat it as such for Top-Heavy pending further guidance from the IRS. I was just hoping the guidance was out there and I just missed it.