401a conversion to Roth IRA

[MK$]

Thank you for your reply. I really appreciate your and every one else’s input. This is an amazing resource. Thank you Spiritrider.

[Larry Ragman]

Thank you so much. My employer has not yet issued my tax forms for this year. Since the amount contributed to my 401a last year is completely by me by post tax dollars, the 1099-R should effectively be zero no?

Also I’m sorry to keep asking but I’m paranoid about this issue. With this form of conversion, I do not have to fill out 8086 or other form that may subject me to a pro rata adjustment. I have considerable traditional IRA from a previous spousal 401k rollover.

Thank you again in advance.

You can take spiritrider to the bank, but I’ll offer one note of caution to encourage vigilance. Pay attention to the 1099R, including the distribution codes. It should be pretty clear when you read the form how much you contributed to after tax in the 401a, and how much was rolled over to the Roth. If the former is less than the latter (usually due to gains in the period before the rollover) that difference will be taxable, unless you split the rollover (taxable to your tIRA, pretax contributions to your Roth). As for the codes in block 7, if I remember correctly it should be marked “G” for direct rollover. Anything else and you need to get it fixed.

[MK$]

• No, the 1099-R(s) will include the total rollover amounts including both employee after-tax contributions and any pre-tax earnings.
• Whether this is one or two 1099-Rs will depend on whether:
  • there were only rollovers of both employee after-tax contributions and pre-tax earnings to a Roth IRA or
  • employee after-tax contributions to a Roth IRA and pre-tax earnings to a traditional IRA and the company's policies.
• The total rollover amounts will be reported on Form 1040 Line 5a and any taxable amount on Line 5b.
• The only way anything would be subject to Form 8606 pro rata taxation would be if there were rollovers to a traditional IRA and a Roth conversion.
• I am certain there is a WCI blog post about the Mega Backdoor Roth.
• What's a spousal rollover? The I in IRA is individual. A spouse's IRA accounts have no bearing on any pro rata taxation.

Thank you so much for your detailed reply. By spousal IRA I thought since we file jointly, an IRA in her name would still count to our pro rata calculations. If I’m to understand that it doesn’t and that traditional IRA in my name alone is to be used, that’s quite liberating. I really appreciate your thoughtful replies. Thank you.

[spiritrider]

• No, the 1099-R(s) will include the total rollover amounts including both employee after-tax contributions and any pre-tax earnings.
• Whether this is one or two 1099-Rs will depend on whether:
  • there were only rollovers of both employee after-tax contributions and pre-tax earnings to a Roth IRA or
  • employee after-tax contributions to a Roth IRA and pre-tax earnings to a traditional IRA and the company's policies.
• The total rollover amounts will be reported on Form 1040 Line 5a and any taxable amount on Line 5b.
• The only way anything would be subject to Form 8606 pro rata taxation would be if there were rollovers to a traditional IRA and a Roth conversion.
• I am certain there is a WCI blog post about the Mega Backdoor Roth.
• What's a spousal rollover? The I in IRA is individual. A spouse's IRA accounts have no bearing on any pro rata taxation.

[MK$]

The annual addition limit also includes any 401a mandatory employee contributions and employer contributions. So the maximum employee after-tax contributions = the annual addition limit (2020 = $57K, 2021 = $58K) - any of those other contributions.

You complete the rollover entries on you Form 1040 return based on a 1099-R from the employer.

Thank you so much. My employer has not yet issued my tax forms for this year. Since the amount contributed to my 401a last year is completely by me by post tax dollars, the 1099-R should effectively be zero no?

Also I’m sorry to keep asking but I’m paranoid about this issue. With this form of conversion, I do not have to fill out 8086 or other form that may subject me to a pro rata adjustment. I have considerable traditional IRA from a previous spousal 401k rollover.

Thank you again in advance.

[spiritrider]

The annual addition limit also includes any 401a mandatory employee contributions and employer contributions. So the maximum employee after-tax contributions = the annual addition limit (2020 = $57K, 2021 = $58K) - any of those other contributions.

You complete the rollover entries on you Form 1040 return based on a 1099-R from the employer.

[MK$]

I am a W2 employee of a University. I have an opportunity to contribute post tax dollars into a DCP (401a) plan and then roll over into a Roth IRA with a limit of $57k/year. This is curious to me since there are no income limitations on this as there is with the regular Roth contribution pathway.

My question regards the necessary tax forms to fill out for this activity. I received a 5498 from Fidelity. My understanding is that because this isn't a rollover from a traditional IRA, I do not need to fill out 8086. Any other forms to fill out?

Any guidance is greatly appreciated. I apologize in advance if this topic has been previously addressed. Thank you very much.