Retirement Savings and Benefits
Questions and comments about IRAs, 401k accounts, social security, and other forms of retirement savings and benefits.
Roth 401k rollover - contributions vs. earnings
Posted by: egreen, May 3, 2017 10:20PM
I have a Roth 401k that was rolled over to Fidelity. (Prior to the rollover, I already had both a rollover IRA and a Roth IRA with Fidelity.) For simplicity, let's say the Roth 401k had $9,000 in contributions and $1,000 in earnings at the time of the rollover.

I expected the full $10,000 to be rolled over to my Roth IRA, but instead Fidelity put $9,000 in my Roth IRA and $1,000 in my rollover IRA. Is that right? I think it's wrong but they insist it is correct. If wrong, could someone help me find a specific IRS reference to back me up?

Thanks

Re: Roth 401k rollover - contributions vs. earnings
Posted by: Alan S., May 3, 2017 11:10PM
As long as you are sure that a Roth 401k was the distributing account, you are correct. A Roth 401k rollover must stay entirely in a Roth account, usually a Roth IRA. Here is the IRS rollover chart, with designated Roth at the bottom. Note that a TIRA account cannot receive rollover funds from a designated Roth:

[www.irs.gov]

Worse yet, since the 1000 was not eligible for rollover to a TIRA, it is now an excess contribution to the TIRA. Perhaps the issuing plan provided Fidelity with incorrect information prompting Fidelity to think that the 1000 did not come from a designated Roth. You need to get on this ASAP. You may need to provide Fidelity with information from the issuing plan.

When was this rollover done? If 2016, you should have a 1099R coded H that should be enough for Fidelity.

Re: Roth 401k rollover - contributions vs. earnings
Posted by: egreen, May 4, 2017 02:23AM
The rollover was done within the last few days. Yes, the distro was definitely from a Roth 401k account. I called Fidelity again and talked to a different rep who tends to agree it was processed incorrectly and has escalated it. They tell me it will be resolved within 24 hours; we'll see. It's scary to think of how many other Roth 401k rollovers they have processed incorrectly and have gone undetected.

Thanks for your quick response.



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