taxation on partial in-service roth distribution

Fact pattern:  Plan allows in-service withdrawals after age 59 1/2 from any (all) fully vested accouts. 

Active participant is over 59 1/2 with 401(k) , roth and match balances in her account.  Her roth contributions started in January of 2014 so she has not yet met the 5-year rule.  She has made ~$21,700 in roth contributions and the earnings on that are ~$8,178.  She would like to take $20,000 from her roth account only.  The participant basically wants to "net" $20k.

It is my understanding from reviewing the regs that there will be a prorata portion of the withdrawal that will be considered earnings and will be taxable to her because she has not met the 5-year rule. ( I came up with the "earnings ratio" and based on that it appears that ~$5,474 of her withdrawal will be taxable to her.)   I understand the 10% excise will not apply, however because she is over 59 1/2.

The plan is with a large 401(k) vendor and I'm checking with them to see how they would apply taxation as well as how they do the calculation. 

In the mean time, anyone agree or disagree with my thought process on the calculation?

"FYI" - Edited to add the following, which is from the IRS website:

What happens if I take a distribution from my designated Roth account before the end of the 5-taxable-year period?

If you take a distribution from your designated Roth account before the end of the 5-taxable-year period, it is a nonqualified distribution. You must include the earnings portion of the nonqualified distribution in gross income. However, the basis (or contributions) portion of the nonqualified distribution is not included in gross income. The basis portion of the distribution is determined by multiplying the amount of the nonqualified distribution by the ratio of designated Roth contributions to the total designated Roth account balance. For example, if a nonqualified distribution of $5,000 is made from your designated Roth account when the account consists of $9,400 of designated Roth contributions and $600 of earnings, the distribution consists of $4,700 of designated Roth contributions (that are not includible in your gross income) and $300 of earnings (that are includible in your gross income).

 Since I make designated Roth contributions from after-tax income, can I make tax-free withdrawals from my designated Roth account at any time?

No, the same restrictions on withdrawals that apply to pre-tax elective contributions also apply to designated Roth contributions. If your plan permits distributions from accounts because of hardship, you may choose to receive a hardship distribution from your designated Roth account. The hardship distribution will consist of a pro-rata share of earnings and basis and the earnings portion will be included in gross income unless you have had the designated Roth account for 5 years and are either disabled or over age 59 ½.

I agree with your calculation.  The $5,474 is subject to taxation/no penalty.  I would certainly check with the 401k vendor to be certain the 1099R will be issued correctly. 

I also agree with your approach pmacduff, and think mctoe's point is a good one, but would rephrase it. It is not only an issue of whether they will report it correctly, but whether they're recordkeeping will allocate the distributed amount, based on the employee's election, all to the Roth portion of the balance. Some recordkeepers do that. Others may not have a place on the distribution forms or on website to indicate which portion of the account the participant wants the distribution from, and may use a pro rata or similar rule.

wanted to post an update...the vendor had me complete a hard copy request because the online withdrawal system was not able to handle this request.  The hard copy form isn't much better and I thought I completed it as they indicated but now they are coming back to me saying I did not complete the form properly,  Yet they will not advise me on the amounts to use to accomplish what the participant needs.   Hopefully I can get it resolved soon.....