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after tax 403b conversion

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  • spiritrider
    replied
    What you can do is dependent on how your previous 403b plan structured the account(s) and what procedures the plan provider has adopted.

    If the employee after-tax contributions and pre-tax earnings are separately accounted for from the employer matching contributions and earnings, and the plan provider follows the rules under IRS Notice 2014-54. This would allow you to do an isolated rollover of the after-tax account, sending the after-tax contributions to a Roth IRA and the earnings to a traditional IRA. You should also be able to rollover the employer matching contributions and earnings to a traditional IRA. This would all be a tax-free operation.

    If the current 403b and/or 457b allow incoming IRA rollovers, you could roll over the traditional IRA to one of those plans to preserve a backdoor Roth option.

    If the employee after-tax contributions and employer matching contributions went to the same account, then the after-tax contributions, pre-tax employer matching contributions and pre-tax earnings on both must be withdrawn/rolled over pro-rata. I don't know what this situation would allow as far as any tax-free options.

    Your best bet would be to contact you previous employer's plan provider, to determine what your rollover options are.

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  • Soskfi
    started a topic after tax 403b conversion

    after tax 403b conversion

    So here's my very minor predicament I was hoping to get some smart people to consider:

    I'm 3 yrs out of residency and have an after tax 403b (not a Roth) with my residency hospital that has 16k in it.  9k of that 16k is after tax dollars that I contributed at the time.  The rest of the money is matching from the employer (3k) and investment gains (4k).  The investment options aren't great but I found a target date fund with an ER that's OK (0.15%).  I just watched The Minimalists documentary and want to simplify my life so I'm trying to streamline my accounts (and clean out my closet!).

    I'm no longer employed with my residency hospital and would love to convert it to a Roth IRA.  My household income when I put the aftertax money into the account was <150k but currently we're in the 33% marginal tax bracket.  Can I convert the 9k (after tax dollars) to a Roth IRA without tax implications or do I have to convert the whole thing and pay taxes on it?

    If I can't convert it to a Roth IRA at my tax bracket, then any suggestions on what to do with it? Backdoor Roth? Or just leave it?  I have a 403b and 457b through my current employer that I max out annually.

    Thanks!
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