Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
IRA rollovers to Roth 401(k)
Posted by: RichC, May 2, 2017 10:06PM
I imagine most of the commenters here know about using rollovers from a trad IRA to a regular 401(k) as a way to isolate IRA basis and do a no-cost conversion of non-deductible trad IRA contributions to a Roth IRA. This happens by virtue of a special rule that says rollovers from a trad IRA to a 401(k) are deemed to be pre-tax funds first.

But with the existence of Roth 401(k) plans can it be done in a less complicated manner? Specifically, are you allowed to directly roll the non-ded IRA money into a Roth 401(k)? Which I guess boils down to two questions: (1) Can Roth 401(k) plans accept rollovers from trad IRAs at all, and (2) If they do, is a rollover from a trad IRA to a Roth 401(k) deemed to be post-tax funds first?

I'm guessing not since no one ever seems to write about this option, but I'm curious.

Re: IRA rollovers to Roth 401(k)
Posted by: Alan S., May 2, 2017 11:19PM
Rich, would be no on both questions. No IRA funds of any type can be rolled into a Roth 401k per this IRS rollover chart:

Where the chart is incomplete is that it lacks a footnote to indicate that TIRA rollovers to the pre tax 401k are limited to pre tax dollars. No after tax amounts in a TIRA are allowed to be rolled into a non IRA plan.

Therefore, accomplishing the basis isolation in the TIRA is limited to the special rule you cited, as well as some marginally related transactions such as QCDs and the one time HSA funding transfer.

Re: IRA rollovers to Roth 401(k)
Posted by: RichC, May 9, 2017 09:13PM
Thanks! I figured something like that was the case but good to know for sure.

Sorry, only registered users may post in this forum.