The automatic feature is very attractive compared to making a call every month.
It is clear that without in-plan roth rollovers, the Roth 401k deferral will be combined with Roth IRA regular basis, the Roth 401k earnings will be combined with Roth IRA earnings. This is consistent with 8606 Line 22 instruction. Very good.
I thought that the in-plan roth rollover was also part of the Roth 401k basis, and should be treated the same way as Roth 401k deferrals, i.e. when rolled over to Roth IRA, they are regarded as Roth IRA regular contributions.
However, this seems to contradict to the wisdom of this forum. Retiredjg wrote a very nice and clear post(viewtopic.php?p=4175886#p4175886), let me quote
So in-plan Roth rollovers to Roth 401k are like conversions to Roth IRA?retiredjg wrote: ↑Sun Oct 21, 2018 8:59 am I think a Roth 401k could contain these things*:
I think what Alan is telling us is that all of these things maintain their exact character if rolled from Roth 401k to Roth IRA. Contributions remain contributions, conversions remain conversions along with their individual clocks, and earnings remain earnings and fall to the bottom of the stack to join the earnings in the Roth IRA. These are the "earnings" that are in the kawill table.
- direct contributions to Roth 401k (contribution)
conversion of pre-tax elective deferrals to Roth 401k (conversion with a 5 year clock)
rollover/conversion of after-tax account to Roth 401k (the after-tax contribution would be contributions and the earnings that were taxable would be a conversion with a 5 year clock)
earnings that have occurred after the money got inside the Roth 401k (this is neither a contribution nor a conversion)
After a Roth 401k to Roth IRA rollover, those in-plan Roth rollovers will be combined with the Roth conversions in the Roth IRA occurred at the same year, taxable portion with the taxable portion, non-taxable portion with the non-taxable portion?
I tried to confirm with Alan's post, and found this(viewtopic.php?p=4446512#p4446512):
Aw, how could one know that the tax form instructions and IRS Regulations are outdated!Alan S. wrote: ↑Wed Mar 20, 2019 2:00 pm However, the 8606 Inst for lines 22 and 24 and the following IRS Reg https://www.law.cornell.edu/cfr/text/26/1.408A-10 were never updated to incorporate in plan Roth rollovers (IRRs) rolled into a Roth IRA. Despite the IRRs being part of the "investment in the contract" in the Roth 401k, these amounts should go on line 24 of Form 8606, not on 22.
A qualified rollover contribution from the pre tax portion of a 401k to a Roth IRA including the so called mega back door conversion should be reported on line 24 of Form 8606. All of these line 24 amounts come out of the Roth IRA under the ordering rules and to further complicate things, Roth conversions, qualified rollover contributions, and direct rollovers from a Roth 401k all go into the 5 year queue for purposes of determining which pre tax amounts are subject to the 10% recapture tax prior to 59.5.
Therefore, if you are rolling multiple portions of a qualified plan into your Roth IRA as well as ordinary TIRA to Roth conversions, you have some complicated accounting rules and tracking work to be done should you ever take a non qualified Roth IRA distribution.
So is there any official source that attests retiredjg and Alan's treatments of IRRs?
Or is it a known convention in the accounting industry, even with the lack of clear IRS regulations?
I do not intend to challenge retiredjg and Alan. After searching online for a long time, I just feel the anxiety to know exactly that this is indeed the correct way to record IRRs on my Roth table.