In the time since I made my previous post there has been discussion as to whether basis in In-plan Roth Rollovers in the 401(k) upon being rolled over to a Roth IRA become conversion basis in the Roth IRA or become contribution basis in the Roth IRA. The instructions for Form 8606 say to include on line 22 "any amount rolled in from a designated Roth, [...] that is treated as investment in the contract." It would seem that investment in the contract would be all funds other than earnings (earnings being the portion that would be taxable i simply distributed), meaning that the amount of the In-plan Roth Rollover should be treated as Roth IRA contribution basis regardless of how long it had been since the IRR was done. That doesn't sit well with me because it implies that someone under age 59½ could bypass the 5-year conversion rule by moving funds from the Roth 401(k) to the Roth IRA. Of course if your are over age 59½, the 5-year conversion rule no longer applies, so it wouldn't matter whether the basis in IRRs is treated as contribution basis or conversion basis in the Roth IRA.
