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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Question: When moving funds from a qualified retirement plan

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Question: When moving funds from a qualified retirement plan to a Roth do you need to consider your existing IRA accounts and apply the pro rata rule just as if you were converting a traditional IRA to a Roth?

Background: I have after-tax voluntary contributions that I have made to the Civil Service Retirement System's Voluntary Contribution Program. At retirement I can roll these funds to an IRA. This is a qualified retirement plan and my account has after-tax funds only. I want to roll to a Roth and want to determine if I can, without having to consider and pro rate with the pre tax funds in my IRA. (Ref. IRS pubs 575 & 590).

MyVirtualCPA :

Hello, and Welcome to JustAnswer.com

MyVirtualCPA :

How are you today?

MyVirtualCPA :

The pro-rata rule comes into play when you have both pre-tax and after-tax dollars in your retirement accounts

MyVirtualCPA :

When you take a distribution, a portion of your distribution will be taxable and a portion will be non-taxable as a result of the pro-rata rule

MyVirtualCPA :

You can't arbitrarily designate certain funds as taxable or not taxable, you have to follow the rule

MyVirtualCPA :

Following the rule can be explained here: http://www.retirementctr.com/edslott.php?theentry=860

MyVirtualCPA :

Unfortunately, qualified retirement plans would follow the same pro-rata rule and you would need to calculate the portion of your distribution to the Roth that was pre-tax and after tax to determine how much tax you pay on the rollover

MyVirtualCPA :

Is there anything else I can assist you with today? If not, please rate my response as "excellent" so that I may receive credit for assisting you today

Richard,

I see you were unable to join our chat. If you would, take a moment to review my response. If satisfied, please rate as "excellent" so that I may receive credit for assisting you today. Thanks again for using JustAnswer.com.
Customer: replied 3 years ago.
Thank youI understand that I can't cherry pick taxed funds from a particular type of account, say the employer's plan or my traditional IRA. I also understand that if I have more than one IRA I have to factor in all funds pre and post tax when rolling to a Roth from any of my traditional IRAs. In both cases I would pro rate taxed with pre-taxed. But in this case I have only taxed funds in my Voluntary Contribution account. If I had no Traditional IRA, I could roll the funds to a Roth with no tax due. But I do have an IRA, so are you saying that I must consider my IRA balance too? In other words, it's like I'm moving my funds from the qualified plan to a traditional IRA and then to a Roth. I can't just go straight to the Roth?I should make it clear that I'm moving my entire balance from my qualified plan, all these funds are taxed, I had no pre taxed in this account which I can explain, if necessary. Further, I will not be moving any of my IRA funds.
Oh I see what you are saying. No, you would not have to consider your traditional IRA together with your qualified plan. Match IRA with IRA and plans with plans.

Please let me know if you need anything additional. Thanks again for using justanswer and please take a moment to rate my response excellent so that I may receive credit for assisting you today
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Customer: replied 3 years ago.

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The disclaimers are part of the site, and I have no control over them. I'm sorry you feel this way.

Thanks and have a great day.