In Plan Roth 401(k) Conversion

[RestAssured]

Hi All.

I have a client who performed an In-Plan Roth Conversion (IPRC) a few years ago.  He was in a segregated account and even "carved out" that portion and opened a separate segregregated acct just for that newly-roth money (which is still inside the plan, keep in mind).

Fast forward to now, and client is changing investment custodians.  The new custodian is saying they won't accept this Roth segregated plan account because it's Roth conversion money.  

Is this something you've heard of?  What can we do, besides finding a new custodian?  My client has always been a little nervous about the IPRC, and now his fear is being proven.  He is worried that when he finally rolls all his money out of the plan, he will be taxed again on that part which has already been taxed!

Thanks all!

[Appleby]

It appears that this plan is under a prototype, for which the custodian is responsible for some defer o record-keeping? Otherwise, it would (should ) not matter to them.

I recommend escalating the call. Roth 401(k) accounts are required to be maintained separately from other 401(k) assets.  The receiving custodian is required to maintain that separate accounting.

Is it possible that:

1. They think this is a 'Roth IRA conversion", or
2. Their plan does not permit designated Roth accounts?

If number 1, then the issue can be resolved by helping the new custodian to understand the rules. If number 2, then they are unable to accept the transfer, unless the plan is amended to permit designated Roth account contributions.

[RestAssured]

Thank you Appleby.

I hope the answer is your #1.  The Plan document has always allowed for Roth, so I don't believe it's your #2 answer.

I hope that when my client speaks with the financial custodian, he will be able to explain the situation.  I have also offered to help by speaking with them (as TPA), of course.

Thanks for your thoughts.  Just sort of wanted to raise this up the flag pole, so to speak, to see if my problem is common or not.  It appears that we are okay, and that it's the financial house's misunderstanding.  Thanks!!