Rollover of 401K to Roth401K

[hselin]

Hi,

I received a 1099-R for my 410K post-tax employee contribution.

This after-tax contribution is deducted from my monthly wages and gets converted automatically through an "in-plan conversion".

I inputted the numbers and was presented with the following questions:

1. Is this 1099-R reporting a rollover of funds from a 401k plan to a designated Roth 401k?
   I selected "Yes, this money rolled over to a designed Roth 401l account.
2. Did you make any after-tax contributions to your 401k plan? These would be contributions you made into the plan yourself, rather than being made by your employer on your behalf. (This is not common.)
   Should I select "Yes, I made after-tax contributions to a 401k plan." Since I made the contributions from my wages? or "No, I did not make after-tax contributions to a 401k plan." Since the contributions are deposited into the 410K plan through the company payroll?

Thanks!

[DavidD66 · Accepted solution]

It depends.  You said at the beginning of your question that the 1099-R was for your "post-tax" employee contribution".  If they are post tax, then you should answer Yes.  As the program mentions "This is not common."  It usually only occurs when someone is making the maximum pre-tax salary deferral ($23,000 if you are under 50).  This means you are paying tax on those contributions.  It's similar to making a non-deductible contribution to a traditional IRA.  The earnings are tax deferred, and the principal (the amount you contributed) is not taxable when it is withdrawn.  In addition, The principal is eligible to to be rolled over to a Roth IRA.  

If you rolled over funds from your 401(k) that were pre-tax salary deferrals,  you will answer no.

[hselin]

Thanks for the help @DavidD66 !

Yes, these contributions are made on top of the max pre-tax salary deferral, and I’ve already paid taxes on them.

From what I understand, with a daily "in-plan conversion" to a Roth 401(k), both the after-tax contributions and any earnings could be withdrawn tax-free in retirement.

[DavidD66]

You should select "Yes, I made after-tax contributions to a 401k plan.".   And you are correct, you will be able to withdraw your after-tax contributions and any earnings tax-free when you retire.  I believe that the only stipulation is that you must be 59 1/2 and the Roth account has to have been open for at least five years.