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New Jersey established more that a half century ago a Supplemental Annuity Collective (SACT).  During this period SACT has offered two plans:  A 403(b) arrangement for qualified employees and an after-tax arrangement for all employees, including qualifiers for the pre-tax 403(b).  The investment menu is the same for each plan.

Q.:  A retiree has contributed to the after-tax plan for 35 years and wants to effectuate a rollover of his entire balance to a Roth IRA----is this a permissible transaction.

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Loves401(k) idea is a good one, and expand it to the general disclosure (SPD equivalent) of the after-tax plan.

If you want to be more analytical, the first question would be whether or not the after-tax plan is a qualified plan.  If not, no rollover.  If so, then it is likely that the earnings on the contributions would be subject to taxation if rolled over to a Roth. 

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14 hours ago, QDROphile said:

Loves401(k) idea is a good one, and expand it to the general disclosure (SPD equivalent) of the after-tax plan.

If you want to be more analytical, the first question would be whether or not the after-tax plan is a qualified plan.  If not, no rollover.  If so, then it is likely that the earnings on the contributions would be subject to taxation if rolled over to a Roth. 

The after-tax Plan was implemented to supplement the DB pensions accrued by NJ public employees.  Does this make it a qualified plan?  If it is a qualified plan do the after-tax contributions make it a Roth or must the Plan Document state that it is a Roth?   

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it is 2018. if the person has put away into the after tax for 35 years, then that goes back to 1983.

A Roth contribution wasn't even possible

"Under a Roth IRA, first enacted in 1998,....." (and for qualified plans it was 2006)

so it would be impossible for the after tax contributions to have been a ROTH.

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Under current IRS notice/ruling the participant can rollover the earnings portion to a pre-tax IRA and the contributions portion to an Roth IRA.  These notices/rulings were issued about 4 years ago, 51 years after the SACT was enacted.  Would you disallow such rollovers because the ruling was issued way after the SACT began?  

If these two rollover transactions are proper, why is it improper to roll the entire account balance into a Roth IRA?

 

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Joel:

Almost every time I try to respond helpfully to your posts, I regret it.   You know just enough to be dangerous and your attitude is always annoying, or worse.  Read the responses carefully and then reframe your questions so they are not so insolent.

You did not provide enough information to determine if the "after-tax plan" is a qualified plan.  That point can be determined by you after inquiring elsewhere now that you have been provided with the question to ask.  I think we can be relatively sure that it is not a Roth plan, as thoughtfully explained by Tom Poje, which is the basis of your first question.  With respect to the rollover part of your question (and the off-putting presumptuous follow-up question), no one said that a distribution (if from a qualified plan) could not not be rolled over to a Roth IRA .

 

 

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So the website http://www.nj.gov/treasury/pensions/epbam/supplement/sactsadistr.htm says:

Quote

Any investment gains on a SACT Regular account are eligible for tax-free rollover to an IRA.

So earnings are subject to tax upon distribution, unless rolled to an IRA.  Now, if you want to convert the IRA to a Roth IRA and pay taxes upon the conversion, go for it.  Nothing indicates that the plan itself is Roth, even though the contributions are after-tax.

 - There are two types of people in the world: those who can extrapolate from incomplete data sets...

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18 minutes ago, QDROphile said:

With respect to the rollover part of your question (and the off-putting presumptuous follow-up question), no one said that a distribution (if from a qualified plan) could not not be rolled over to a Roth IRA .

 

 

In fact I would say you have been told at least twice at this point that if this is a Qualified Plan then the whole distribution would be rolled to a Roth IRA- it would just be part of it would be taxable at that time.  The part that is the earnings that have never had taxes paid on them would be taxable upon being rolled to a Roth IRA.

That is simply the law regarding qualified plan rollovers.  

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  • 3 weeks later...

A plan must allow Roth contributions as a condition precedent to establishing any Roth accounts.  If that condition is met, then the plan must provide for in-plan transfers.  If one meets the conditions imposed by the plan in order to transfer an existing non-Roth amount then said existing non-Roth amount can be transferred to a Roth account.  A plan must provide for accurate recordkeeping.

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On ‎2‎/‎26‎/‎2018 at 2:10 PM, Mike Preston said:

A plan must allow Roth contributions as a condition precedent to establishing any Roth accounts.  If that condition is met, then the plan must provide for in-plan transfers.  If one meets the conditions imposed by the plan in order to transfer an existing non-Roth amount then said existing non-Roth amount can be transferred to a Roth account.  A plan must provide for accurate recordkeeping.

And whether that can be done via a change in the regulations or whether it requires a legislative act is best answered by someone much ore conversant in NJ law.  Not sure whether the legislators/regulators would be willing to give up future tax revenue on the earnings.  Heck, NJ doesn't conform with federal tax treatment for certain 457 plans.

 - There are two types of people in the world: those who can extrapolate from incomplete data sets...

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On 2/26/2018 at 5:10 PM, Mike Preston said:

A plan must allow Roth contributions as a condition precedent to establishing any Roth accounts.  If that condition is met, then the plan must provide for in-plan transfers. 

just to clarify, I believe in plan transfers are optional, not required.

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