Please help with a strategy to rollover IRA to 401k

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manssang
Posts: 3
Joined: Sun Jan 21, 2018 9:45 am

Please help with a strategy to rollover IRA to 401k

Post by manssang » Sun Jan 21, 2018 9:51 am

Hello,

I have a traditional IRA that includes a rollover from an old 401k plan, deductible contributions and non-deductible contributions. I know, what a mess!

I would like to roll this over into my current 401k plan which does not accept any after-tax contributions. What can I do now? I was wondering if I can convert the non-deductible contributions (2 years of these) to a Roth IRA and just pay the tax. We are blessed to be in the highest marginal tax rate this year so it sure will hurt. I'm not sure this will mitigate the plan rules - ie after doing this, I don't want them to say no, we still won't accept this rollover

I'd appreciate any suggestions or insights from this wonderfully knowledgeable group.

Thanks!

Alan S.
Posts: 7499
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Please help with a strategy to rollover IRA to 401k

Post by Alan S. » Sun Jan 21, 2018 11:05 am

What you should do first is to roll the pre tax balance of your IRA (total value less your basis) into the 401k. Be sure not to roll the entire balance.

If the 401k accepts the partial rollover, all you have left in the IRA is basis and you can then convert that tax free. Do not convert first, because if the 401k does not accept the rollover you are stuck with the conversion tax bill. Some 401k plans will not accept incoming rollovers from IRA accounts that are not purely rollover IRAs because they are concerned with receiving IRA basis. Hopefully your 401k plan is not one of those.

manssang
Posts: 3
Joined: Sun Jan 21, 2018 9:45 am

Re: Please help with a strategy to rollover IRA to 401k

Post by manssang » Mon Jan 22, 2018 8:06 pm

Thank you for the response. By the basis, you mean the IRA contributions? Both deductible and tax deductible? So just rollover the earnings and the rollover IRA?

Alan S.
Posts: 7499
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Please help with a strategy to rollover IRA to 401k

Post by Alan S. » Mon Jan 22, 2018 11:22 pm

No. Basis is the amount of non deductible contributions you made and reported (or will report) on Form 8606.

This is the amount on which you have already paid taxes. The rest of your balance comes from deductible contributions and gains on both deductible and non deductible contributions.

Basis stays in your TIRA and after you roll everything else into the 401k, you can convert the basis tax free.

NOTE: The old 401k plan was probably 100% pre tax when you rolled it over to an IRA. However, if any amounts in that rollover were from after tax contributions you made to the 401k, these after tax amounts are ALSO basis in your IRA and are added to your IRA basis on line 2 of Form 8606.
Unlikely to apply here, but you should look into it if you think that old 401k included after tax contributions.

martianpayslip
Posts: 2
Joined: Mon Jan 29, 2018 5:50 pm

Re: Please help with a strategy to rollover IRA to 401k

Post by martianpayslip » Thu Feb 01, 2018 4:15 pm

Instead of a partial rollover, could you split the tIRA into two so that the basis was in its own tIRA and the rollover amounts were in its own tIRA and you could then rollover the entire tIRA that was only rollover+gains?

ivk5
Posts: 260
Joined: Thu Sep 22, 2016 9:05 am

Re: Please help with a strategy to rollover IRA to 401k

Post by ivk5 » Thu Feb 01, 2018 4:32 pm

Alan S. wrote:
Mon Jan 22, 2018 11:22 pm
No. Basis is the amount of non deductible contributions you made and reported (or will report) on Form 8606.
And if you haven't been filing 8606, you'll need to go back and do it for all the years you missed.

retiredjg
Posts: 32367
Joined: Thu Jan 10, 2008 12:56 pm

Re: Please help with a strategy to rollover IRA to 401k

Post by retiredjg » Thu Feb 01, 2018 4:49 pm

martianpayslip wrote:
Thu Feb 01, 2018 4:15 pm
Instead of a partial rollover, could you split the tIRA into two so that the basis was in its own tIRA and the rollover amounts were in its own tIRA and you could then rollover the entire tIRA that was only rollover+gains?
Not really. And that step is unnecessary anyway.

Whatever you drain off first is considered to be the pre-tax money. So just send the pre-tax money (or most of the pre-tax money) to the 401k (if it will accept it) leaving the basis which can be converted to Roth for little to no tax.

manssang
Posts: 3
Joined: Sun Jan 21, 2018 9:45 am

Re: Please help with a strategy to rollover IRA to 401k

Post by manssang » Mon Feb 12, 2018 1:56 pm

Thank you all so much. I appreciate the time you all took to help me. Looks like it may be possible but my 401k provider wants to know the funds the contributions went into so now its just a slog to figure it out. For the last few years I've pretty much invested in the target retirement fund. I'm hoping I haven't mixed everything up so much it's beyond repair but maybe the market will crash so I'm underwater and then no tax implication to roll into a Roth IRA anyways :oops:

Some gallows humor here

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