FormsRstillmylife Posted January 18, 2024 Posted January 18, 2024 A plan with Roth can have an in-plan rollover to the Roth account. Notice 2014-54 says an after-tax account can have its after-tax employee contributions sent to a Roth IRA and its pre-tax investment return sent to a traditional IRA. Participant does not want to pay income tax on his after-tax account in-plan rollover. Can a participant send after-tax employee contributions to the Plan's Roth Account and leave the investment return in the After-Tax Account under the plan? Is Notice 2014-54 insufficient relief such that the investment return has to be sent to a traditional IRA, instead of being left in the Plan? With the traditional IRA being rolled back into the Plan as a third step. Could the investment return just be rolled to the Plan's own rollover account (assuming all rights are preserved) in order to skip the IRA two-step dance? Assume an individually designed plan that can be drafted/amended in any legal manner for a qualified plan.
Lou S. Posted January 18, 2024 Posted January 18, 2024 I'm confused. Has something changed with After-Tax -> ROTH conversions? My understanding is you can convert all or part of the After-Tax source to ROTH (without touching the Pre-Tax Source). But any distribution from the After-tax source including a ROTH conversion has to the prorated between after-tax basis and previously untaxed gains. The basis is tax-free, the gains are subject to taxation in the year of conversion but then become ROTH basis Luke Bailey 1
CuseFan Posted January 19, 2024 Posted January 19, 2024 You aren't confused, just sounds like they want to avoid taxes on the gains on the VAT account without rolling out the VAT account and steering to two IRAs - Roth and traditional. Luke Bailey 1 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com
FormsRstillmylife Posted January 23, 2024 Author Posted January 23, 2024 So . . . . . I am being an aggressive tax attorney and no one has tried this? It seems like it fits the intention of Notice 2014-54 to allow a simple transaction instead of multiple steps to get to the same tax result, but the Notice does not say you can.
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