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supersonic_528 OP t1_iujvz7g wrote

Reply to comment by DeluxeXL in After-tax 401K to Roth IRA -- pro rata taxes by supersonic_528

> Pre-tax and after-tax 401K accounts are considered separate pools, so for the aforementioned after-tax 401K to Roth IRA rollover, no tax will be paid on pro-rata basis based on the amount I have in pre-tax 401K.

Is this true, or am I missing something? I came across this link. It basically says that we do need to pay tax on a pro-rata basis if we are rolling over from an after-tax 401K account.

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans

Can I roll over just the after-tax amounts in my retirement plan to a Roth IRA and leave the remainder in the plan?

No, you can’t take a distribution of only the after-tax amounts and leave the rest in the plan. Any partial distribution from the plan must include some of the pretax amounts. Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account. To roll over all of your after-tax contributions to a Roth IRA, you could take a full distribution (all pretax and after-tax amounts), and directly roll over:

  • pretax amounts to a traditional IRA or another eligible retirement plan, and
  • after-tax amounts to a Roth IRA.
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DeluxeXL t1_iuk20bq wrote

>> Pre-tax and after-tax 401K accounts are considered separate pools, so for the aforementioned after-tax 401K to Roth IRA rollover, no tax will be paid on pro-rata basis based on the amount I have in pre-tax 401K.

> Is this true

Yes, it is true. Each 401k subaccount is its own pool.

Your after-tax subaccount contains

  1. after-tax contributions
  2. pretax earnings, if any -- this only happens if you don't immediately roll out after your after-tax contribution.

When you roll out of this subaccount, you must roll out both 1 and 2 and nothing else.

The IRS agrees:

> Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account.

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