Keep the Course: In Plan Roth Rollovers

Each Wednesday 401kBasics posts a new article in a weekly series called “Keep the Course”. This series is designed to give the average consumer information on how to keep their 401k plan on track! Your feedback or suggestions on future articles is welcome.

The IRS recently passed new regulations allowing participant to convert some of their pre-tax money to Roth (after-tax) money. This is referred to as an in plan Roth rollover, and the provisions are as follows:

  • This is a distribution from your pre tax funds that you rollover into your Roth account all within the same plan.
  • Any participant, beneficiary or alternate payee that is already eligible for a withdrawal can take advantage of this option.
  • You can only rollover distributions that are eligible, this excludes: hardships, RMDs, installments, annuity payments, corrective distributions, and dividend payments.
  • The amount distributed and rolled over within the plan will count towards your taxable income, and will be reported on a 1099-R.

In order for a plan to allow this option, there has to already be a Roth provision in the plan. Also, there are special tax provisions for those that process this type of transaction in 2010. For further information, please review this IRS site; contact your employer or retirement plan provider.

This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.

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