How to report on 1099R Direct Rollover from Designated Roth Account of 401(k) Plan to Roth IRA

[AdKu]

How to report Direct Rollover from Designated Roth Account from 401(k) Plan to Roth IRA on Form 1099R?

I search this forum to see if similar question has been raised but I didn't find direct answer I was hoping for.

I also spend some time reading the reg. & the code that deals with Designated Roth Account with no concrete satisfactory result.

https://www.law.cornell.edu/cfr/text/26/1.402A-1

https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts

According to the 'instructions for Forms 1099-R and 5498(2017)' page 5, I need to enter the designated Roth account amount rolled over in box 1, 0 (zero) in box 2a, and Code H in box 7.

https://www.irs.gov/pub/irs-pdf/i1099r.pdf

I don't feel this will be satisfactory to inform the investment firm that will be receiving the designated Roth account distribution  about the basis.

Can someone help me how they will report on 1099R Direct Rollover from Designated Roth Account of 401(k) Plan to Roth IRA?

 

[Mr Bagwell]

Adku,

You have the 1099R figured out.

Now to the basis part.....  IMO: the important factor of 401k Roth to Roth IRA rollover is the opening and funding of the Roth IRA and the five year clock. 

IF the Roth IRA has been opened and funded in (pick a year) 2016.  The five year clock starts in 2016.  You don't get a new clock for the 401k Roth funds after the previous opening and funding.  Doesn't matter if the funds have been in a Roth 401k for a few months or few years.  2016 is the magic clock start date.  The basis from the 401k is of little use for the Roth IRA, if anything at all.  The clock starts when the first dollars go into the Roth IRA. In this case, 2016.  When new dollars are added to the Roth IRA, basis would be tracked.  But the basis of the rollover would be the whole rollover amount.  It seems counter intuitive that the 401k is tracking everything for proper taxation and then the Roth IRA seems to say "who cares".

If the Roth account is opened and funded with these rollover dollars, the clock is starting over with the current year and the whole rollover amount is the basis.

Of course the basis is important for the 401k.  You would need to know when the clock started and when the participant turns 59 1/2.  But that really only pertains to the 401k.

When I used to visit with participants that were very Roth minded, I told them to open and fund a Roth IRA asap, provided they could.  Sometimes the compensation levels prevented this.  This way the Roth clock starts and they have the ability to roll the 401k Roth to Roth IRA without having the clock start over.

Plus, if you roll the 401k Roth out of the plan previous to 70 1/2, no RMD's on the Roth IRA.....

 

[Kristina]

The 1099R is filed in January following the distribution/rollover, especially this year since the 2018 1099R has not been released by the IRS yet.  The 1099R does not tell the receiving investment company about the distribution/rollover.  Its only purpose is to tell the IRS that there has been a distribution/rollover and how much, if any is taxable.

You need to provide a statement showing the information on the participant's account including when the Roth was initially effective and the participant's basis in the Roth portion.