Yes, the pro-rata rule does apply when 401k is rolled to only the Roth 401k. Therefore some of the rollover will be included in your taxable income. To avoid this you could take a full distribution (all pretax gains and after-tax amounts), and directly roll over:
- pretax amounts to a traditional IRA or another eligible retirement plan, and
- after-tax amounts to a Roth IRA.
Please see Rollovers of After-Tax Contributions in Retirement Plans for additional information.
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