Moving Rollover IRA into 401k , cost basis to worry about ?

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indexlover
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Moving Rollover IRA into 401k , cost basis to worry about ?

Post by indexlover »

My wife has three rollover IRA's from prior jobs which i want to move into her companies 401k. This will help her contribute to ROTH IRA.
My question is, when you rollover from 401k into IRAs or from rollover IRA's back into 401k , is there a cost basis which i need to worry about ?
My understanding is that since IRA ( or 401k) contributions are deductible at the time they're made, and so when the account holder starts taking distributions in retirement, the full amount of each distribution is subject to tax and hence no need to worry about cost basis.
Am i right about the cost basis assumption ?
Any gotcha's I need to worry about when i move the Rollover IRA back into 401k ?
This move is from Vanguard ( index funds and ETFs) into Fidelity ( index funds). TIA
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David Jay
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by David Jay »

If these are all rollovers (from pre-tax 401K) such that all funds in the consolidated 401K are pre-tax, then there is, in essence, no such thing as a cost basis (you can know your cost basis as trivia, but that is the extent of the use).

All money coming out of the 401K (or a future rollover tIRA) will be taxed as income in the year withdrawn. There is no differentiation between contributions and gains. Or capital gains vs. dividends. It is all taxable cash as far as the IRS is concerned.
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retiredjg
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by retiredjg »

indexlover wrote:Am i right about the cost basis assumption ?
Sounds like you are right. If none of the money has ever been taxed, such as from non-deductible contributions to IRA, there is no basis and it is all just waiting to be taxed at withdrawal.
BoglePablo
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by BoglePablo »

retiredjg wrote: Wed Jun 07, 2017 12:18 pm
indexlover wrote:Am i right about the cost basis assumption ?
Sounds like you are right. If none of the money has ever been taxed, such as from non-deductible contributions to IRA, there is no basis and it is all just waiting to be taxed at withdrawal.
On the other hand: I have a tIRA with some basis (after tax contributions). How do I handle the rollover from the tIRA to my employer's 401(k)? My employer's 401(k) does track after-tax contributions, so: perhaps I can just specify the basis, so it can continue to be tracked? Has anyone done this before? Has your employer handled it as described?

Thanks for any insight anyone can provide!
dbr
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by dbr »

BoglePablo wrote: Sat Apr 07, 2018 10:27 pm
retiredjg wrote: Wed Jun 07, 2017 12:18 pm
indexlover wrote:Am i right about the cost basis assumption ?
Sounds like you are right. If none of the money has ever been taxed, such as from non-deductible contributions to IRA, there is no basis and it is all just waiting to be taxed at withdrawal.
On the other hand: I have a tIRA with some basis (after tax contributions). How do I handle the rollover from the tIRA to my employer's 401(k)? My employer's 401(k) does track after-tax contributions, so: perhaps I can just specify the basis, so it can continue to be tracked? Has anyone done this before? Has your employer handled it as described?

Thanks for any insight anyone can provide!
I found this paragraph at the site below:

"Currently, 69 percent of company 401(k) plans allow workers to bring IRA money to them, according to the Plan Sponsor Council of America, an employer group. Workers can only move IRA money that was seeded with pre-tax dollars, either via a rollover from an earlier 401(k) or from contributions that were originally tax-deductible when they were made to the IRA."

https://www.reuters.com/article/column- ... U420140409

A good idea would be to talk to your plan administrator.
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retiredjg
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by retiredjg »

BoglePablo wrote: Sat Apr 07, 2018 10:27 pm On the other hand: I have a tIRA with some basis (after tax contributions). How do I handle the rollover from the tIRA to my employer's 401(k)?
You transfer all but the basis to the 401k if they will accept it. Then convert the remainder of the IRA to Roth with little to no tax. This leaves you with nothing in any tIRA.

My employer's 401(k) does track after-tax contributions, so: perhaps I can just specify the basis, so it can continue to be tracked? Has anyone done this before? Has your employer handled it as described?
You are not allowed to roll IRA basis into a 401k. To my knowledge, the fact that the 401k holds and tracks after tax money does not change that.
Last edited by retiredjg on Sun Apr 08, 2018 11:07 am, edited 1 time in total.
Spirit Rider
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by Spirit Rider »

As previously stated, you are only allowed to rollover pre-tax IRA assets to a 401k.

Only after-tax contributions from another qualified plan can be rolled over and tracked in a 401k.
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retiredjg
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Re: Moving Rollover IRA into 401k , cost basis to worry about ?

Post by retiredjg »

Subtle, but your wording is much more precise than mine. :happy
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