Are your Rollover Notices Current? (article)
The IRS issued Notice 2014-54 relating to a qualified plan rollover that includes both pre-tax and after-tax funds. Historically, if a rollover was made to two or more different plans, and if the distribution included both pre-tax and after-tax contributions, the rollovers to the new plans would each contain a proportionate share of the pre-tax and after-tax contributions. According to this recent Notice, a participant can direct how the rollover will be split between the accounts. In effect, a participant could direct that all after-tax contributions, for example, are rolled into a Roth individual retirement account while all the pre-tax contributions are rolled into a traditional IRA. Employers should review their rollover notices to make sure this is explained.
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