Roth Rollover to 401(k) Plan

[52626]

Employer purchased Company B. Company B terminated their plan prior to the sale and some of the participants rolled their distributions to the new employer's plan.

The new employer does not allow Roth contribuitons, however Company B did allow Roth Contributions. When the rollovers were done to the new plan the Roth Accounts moved along with the pre tax account. According to the TPA, the Roth transfers would be considered a frozen source until the new plan was amendmed to allow roth contributions.

I thought in order to transfer a roth account from one employer's plan to another, the new plan had to offer Roth contributions to begin with.

What am I missing???

[Lou S.]

I'm with you. I thought to accept ROTH-rollover or do in-Plan Roth conversions, you also had to offer the ability to make ROTH-401(k).

[Tom Poje]

well, if 1.401(k)-1(f)(4)(ii) is worth anything
(ii) Special rules for direct rollovers. A direct rollover from a designated Roth account under a qualified cash or deferred arrangement may only be made to another designated Roth account under an applicable retirement plan described in section 402A(e)(1) or to a Roth IRA described in section 408A, and only to the extent the rollover is permitted under the rules of section 402©. Moreover, a participant's designated Roth account and the participant's other accounts under a plan are treated as accounts held under two separate plans (within the meaning of section 414(l)) for purposes of applying the automatic rollover rules for mandatory distributions under section 401(a)(31)(B)(i)(I) and the special rules in A-9 through A-11 of § 1.401(a)(31)-1.

not sure what happens if it is considered a 'transfer' rather than a 'rollover', but I thought transfer was for situations in which a person didn't really terminate, but you needed a reason for having a distribution event, and then at that point for all other purposes it would be considered a direct rollover.

[austin3515]

And to follow through one inch further, a plan with no Roth 401k option does not have any Designated Roth Accounts. Also, in this situation it appears to clearly be a rollover and not a transfer because the plan terminated prior to the acquisition.