After-Tax

Hi, 

One of the terminating plans has after-tax and funds of all non-responsive participants is to be rolled over to an IRA account.  Since few part's have funds in after-tax, I believe the after-tax money will needs to be put into ROTH IRA and the earnings into Traditional IRA?

After tax and Roth are not the same.  I'm not aware of anything that permits you to put after tax money into a Roth IRA.  Interesting though, hard to believe that someone who took the time to make after tax contributions is not responsive.

I respectfully disagree. Also see the following from the IRS:

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans#:~:text=Yes.,IRA without also including earnings.

1 hour ago, Belgarath said:

I respectfully disagree. Also see the following from the IRS:

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans#:~:text=Yes.,IRA without also including earnings.

I think a participant can rollover any part of their distribution to a Roth which is what that seems to be saying.   They just have to accept the tax consequences.  

The question is can the plan force out after-tax to a Roth?

I have not seen that.

I have seen a force out to a regular IRA and working with the IRA company to record the basis that is in the IRA. 

I think the best answer is to put all of the money in a single IRA and get the IRA company to understand there is after-tax money in the IRA that has a basis.  For one thing most of the time two IRAs means two sets of fees to set up the IRA and annual fees.   I would be worried if that is a fiduciary concern if you set something up that has more fees than needed.     I know Millennium Trust Company is able to handle what I just described. 

Yes, I agree and I'm aware Millennium Trust does accept but here the the direction is to rollover to Schwab and I believe they set up two IRA's. 

Thank you!

On 9/3/2021 at 10:24 AM, Belgarath said:

I respectfully disagree. Also see the following from the IRS:

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans#:~:text=Yes.,IRA without also including earnings.

Interesting, thanks, I stand corrected.