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Vanguard 401k Rollover screwup-- Pro-rata implications?

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  • Vanguard 401k Rollover screwup-- Pro-rata implications?

    So vanguard has put me in an annoying position.  I was trying to consolidate all of my investments with Fidelity (who runs my current employer's 401k).  I have a 401k from a previous employer with vanguard.  I accidentally initiated the rollover to my traditional IRA instead of my current 401k, but cancelled the transaction and re-initiated the rollover to my 401k.  My goal being to avoid pro-rata rules with my yearly backdoor roth conversion.  Of course vanguard screwed it up and sent it to the wrong (traditional IRA instead of employer 401k) account, they acknowledged the mistake but say they can't do anything because the money has been deposited and suggested I just roll it over from the traditional IRA to my employer 401k.

    My question -- if I have already done my backdoor roth for the year and also transfer the funds currently in the IRA to the 401k would I be susceptible to the pro-rata rule?  Or would the fact that I began and ended the year with a zero balance IRA be sufficient to avoid the penalty?

    Thanks for the input!

  • #2
    You're fine, just an annoying extra step. As long as you have a zero balance in the pre-tax IRA on 12/31/17, no pro-rata.
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087