MJB9,
The words were those of Massachusetts, not mine, but the basic notion is that Massachusetts did not allow a tax deduction for IRA contributions by their residents, so insofar as MA is concerned, you have already paid MA tax on that contributions, hence the term "pre-taxed" which is short for previously taxed. 401(k) funds are almost always not taxed when contributed. (They are considered "pre-tax" contributions, undoubtedly a confusingly close term.) They are taxed only when withdrawn. So moving them out of the 401(k) into an IRA account creates a portion of that IRA account that was not previously taxed by both the IRS and MA.
