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Roll Over Question

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  • Roll Over Question

    Hello All,

    Please help me with the following situation. As a resident, I moonlighted at a county hospital and the hospital  placed part-time employees in a pension plan. The only available fund in that pension plan for part-time employees is a money market fund which basically earns no return. I’d like to roll over this pension plan, in order to access better performing index funds.

    My understanding is that I have the option of rolling over that pension plan into either a 401k or an IRA.

    This is where I am a little confused. I assume if I rollover into an IRA, then that makes things tricky for a backdoor Roth IRA, due to the pro-rata rule. I previously had a solo 401k when I was set up as an S-corp. I recently changed jobs and now no longer have an S-corp and am paid a W2 and therefore, no longer contribute to my solo 401k.

    My questions are the following:

    1. Is rolling over to the 401k (as opposed to an IRA) the better option, if I still want to make backdoor Roth IRA contributions and want to avoid the pro-rata rule?

    2. Am I allowed to roll over into my old solo 401k, even though I currently am paid as W2 employee and will no longer be making further contributions to my solo 401k?

    Thanks for all your help.

  • #2

    1. Rolling over your pension balance into your current 401k is better than rolling over to an IRA because of what you already know: the prorata rules will prohibit tax-free back-door Roth contributions.

    2. Yes, you are allowed to roll your pension into your dormant SOLO-k, which is the best choice of all.

    3. If you continue to moonlight with the county hospital, you need to be sure that the plan allows "in-service distributions".

    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


    • #3
      Thank you so much. That was really helpful! I will be rolling over to my solo 401k next week. Cheers!