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.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.
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