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Posted

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.

Posted

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

Posted

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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