It's a little confusing to me if the Roth IRA conversion of the after-tax funds requires distribution from the entire Solo 401k, if there are also funds in the Pre Tax bucket.
Per IRS (https://www.irs.gov/retirement-plans/ro ... ment-plans):
Fidelity seems to say that this is not true (https://www.fidelity.com/viewpoints/ret ... r-guidance) but I can't find an IRS source that confirms it:No, you can’t take a distribution of only the after-tax amounts and leave the rest in the plan. Any partial distribution from the plan must include some of the pretax amounts. Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account. To roll over all of your after-tax contributions to a Roth IRA, you could take a full distribution (all pretax and after-tax amounts)
Question: does this mean that in order to roll over all the after-tax non-Roth fund to Roth IRA, one has to also take a distribution from the pre-tax bucket? Or in another word, does mega backdoor Roth only works if the Solo 401k only contains after-tax funds?If the plan allows partial withdrawals and does track each source balance separately, one could take a rollover of just the after-tax source balance, which includes both the after-tax contributions and all of the associated earnings. Again, the after-tax balance would go to a Roth IRA while earnings would go to a traditional IRA.
Another unrelated Solo 401k question: the pre-tax portion of Solo 401k can have sources with different distributable natures, i.e. employee elective, employer cost sharing, rollover from other 401k accounts. How do people typically separate earnings from different sources, if the funds are used to buy the same stock? Is it beneficial to opening more sub-accounts for these different sources as well, or would it be an overkill and unnecessary hassle? What are bad things that could happen if the funds from these different sources are mixed together?
I've learned a lot from reading about Solo 401k in this forum. Thanks for helping out more