Roth Conversion Tips
Rev. 02/25/10; E-mail Alert 2010-3

We have been receiving numerous calls about the new rules permitting Roth conversions. The calls indicate that there is a lot of confusion on the subject. Some basic tips on the Roth conversion rules.

• In order for a qualified plan [such as a 401(k)] participant to convert to a Roth IRA, the participant must have a distributable event.
• The 401(k) participant does not have to first move the money from the 401(k) to a traditional IRA and then convert the traditional IRA to a Roth IRA, although this method may be utilized.
• A participant may make a conversion to a Roth directly from his or her 401(k) plan to the Roth IRA.
• The participant may convert all the assets in his or her 401(k) plan to the Roth IRA, including employer sources and after tax amounts.
• Designated Roth amounts may be directly rolled to Roth IRA but are not a conversion.
• In addition, the designated Roth funds are reported on a separate Form 1099-R then non-designated Roth plan assets being converted to a Roth IRA.
• Once the 401(k) funds are rolled into a Roth IRA, they cannot go back to the 401(k).

 

For much more on Roth conversion, reporting and portability, click here for information or to register for our Roth Conversion and Portability eSeminar.