Tad Borek wrote:

- quote -

Ah, ok. I still don't know if our plan does direct to Roth rollovers or
not. There would be some convenience to getting the whole done at once.
I could get all after-tax immediately in a Roth and look at converting
or not parts of the TIRA holding the taxable earnings.

Part of the problem is talking to reps at the plan adminstrator. The
first one told me I could also rollover all the company match money
too. This initially got me quite interested. However, when I reviewed
the plans docs, if you do that they stop matching for six months. No
thanks.

The second got all freaked when I said I wanted to roll over the
after-tax and the earnings to the same IRA. He told me I'd be
double-taxed. It did make me go research it, and I found out about IRS
Form 8606. This site was useful:

<http://www.investopedia.com/articles.../04/092904.asp

- quote -

I hadn't thought about qualifying for a Roth. I guess if they don't
have to verify income levels, it isn't too much of a problem. I'll read
that when I get a chance. I'll have to press them again for an answer
as to whether they allow direct to Roth.




Brian

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Default User wrote:
- quote -

Very generally...the issue is that plan administrators have certain
responsibilities and liabilities, including some that are triggered when
distributing funds. And some "legally permissible" aspects of these
plans only take effect if the plan documents are amended accordingly.

But Notice 2008-30 says, for example, that the administrator doesn't
need to verify that the participant qualifies to make the transfer to a
Roth - see Q-5.

-Tad

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Tad Borek wrote:

- quote -

That's an interesting take. I'll find that notice and review it.

- quote -

I don't have any other TIRAs. The partial nature of the conversions had
me concerned, which is why I was considering only doing a rollover of a
size where I could handle all the taxable portion at once. Handle in
terms of not moving myself up a tax bracket. Covering the tax isn't too
much of a concern, I just don't want to pay more than is necessary by
sliding up a bracket.

- quote -

Yes, I see. I don't know what MO would do.

- quote -

Will they? What's the difference from their standpoint? Sending two
checks to the receiving institution?




Brian

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Default User wrote:
- quote -

Brian, you should research a recent IRS Notice, 2008-30. At least one
commentator says that it implicitly allows you to rollover ONLY the
after-tax part directly into a Roth IRA, as a "qualified rollover
contribution" (jargon for the 401k-to-Roth direct transfer). And you
could rollover the pretax money into a traditional/rollover IRA. If you
could do that there wouldn't be any federal tax on the portion moved to
a Roth.

In the past if you two-stepped it, meaning 401k to IRA, then converting
all or part of your IRA(s) to a Roth, the tax treatment was different.
You'd need to add up all your IRA values, and figure out the percentage
that is after-tax money...let's say it's $30k in IRAs, $10k is after-tax
contributions. Only 1/3 of every dollar converted to a Roth would be
after-tax money, regardless of which account the money came from.

But using the 401k-to-Roth provision you could convert the full $10k,
and only the full $10k, without incurring federal income tax. I don't
know if all states follow this as well.

One other thing mentioned in the notice...plan administrators need to
honor requests to rollover directly to a Roth IRA.

-Tad

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Avrum Lapin wrote:

- quote -

I certainly could withdraw it, but I don't want to. The goal is to get
it into a different tax-advantaged account with better options than the
company 401(k).





Brian

--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)

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In article <68go8pF2s8jq3U1[at]mid.individual.net> ,
"Default User" <defaultuserbr[at]yahoo.com> wrote:

- quote -

The rest snipped

My recollection (1994 time frame) was that after tax money in a 401k
(but not the gains there on) can be withdrawn first without tax
consequence but once the 401k was rolled in to an IRA the after tax
dollars was treated like any other after tax contribution.

Sorry but I can't cite chapter and verse.

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In my 401(k), I have a fair chunk of after-tax contributions. That
money is eligible for rollover to an IRA. In such a rollover, a share
of earnings comes with it. From talking to the plan reps, it looks like
it's about half each, that is rolling over $10k of after-tax
contributions would bring about that much in taxable earning along.

My reason for wanting to do this is that my tax-advantaged space
outside the 401(k) is limited, and there are some things I'd like for
my AA that either aren't available or don't have good choices in the
plan.

When I do that, is it best to plan for an immediate Roth conversion? My
marginal rate was 25% last year, with a state tax of 6%. I am under the
income limits for Roths, and in fact that's all I have as far as IRAs
(not all that far).

It's unclear to me yet whether my plan allows the new (as of 2008)
rollover directly to a Roth. Someone on one of the forums said that if
a rollover is possible at all from the plan (it is) then a Roth would
be possible without anything special from my plan administration.

At any rate the two-step rollover to TIRA then Roth conversion process
would still be possible. If I'm going to convert to Roth, it seems
easier to pick an amount that I would be able to do all at once, to
avoid repeated filing of IRS form 8606, plus I'd want to avoid bumping
myself up in tax brackets.

Are there any convenient online tools that will assess the impact of a
Roth conversion on tax bracket given a guesstimate of the taxable
income without the conversion?

If I don't convert now to a Roth, then (as I understand it) I have to
file form 8606 next year and then whenever distributions are taken in
the future.

Another suggestion from the forum was to roll to a TIRA, then roll back
to the 401(k). If I read IRS Pub 590, correctly, then only the taxable
money would roll back into the plan.

<http://www.irs.gov/publications/p590/ch01.html#d0e3542
That would give a TIRA with nothing but non-taxable funds, so an
immediate Roth conversion would be no tax impact. I, as I understand
it, would be able to roll back out the taxable funds from the 401(k) as
I wished, so I could do some later and pay the taxes for a Roth if
desired.




Brian

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