Reply To: Reverse rollover – IRA to 401k question

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Alan S.

You are correct to be concerned, since your 401k provider is dead wrong. A 401k plan is not allowed to accept IRA basis, and if an error is made they will have to distribute that basis with allocated earnings back to you. Returning that basis to your IRA is very problematic if more than 60 days has passed since the IRA direct rollover.

Because the 401k cannot accept IRA basis, there is a rule that states that the first dollars rolled into the plan are deemed to be the pre tax balance of all your IRAs. The remaining IRA basis still in your IRA can then be converted to Roth tax free.

Many 401k plans will ask for you to certify that your IRA to 401k rollover does not contain any IRA basis before they will accept any portion of your IRA. Of course, you would need to have tracked your basis correctly and filed Form 8606 to report all non deductible contributions over the years. Line 14 of your last 8606 will show your cumulative basis up to the year of that 8606.

  • This reply was modified 11 months, 3 weeks ago by Alan S..