After-tax rollover

[SumDay]

DH recently took a lump sum payout offer and his GM pension is now dust in the wind. We're rolling it over into his 401(k).

Today we got a notice stating that they'd be sending us a check as a refund of his after-tax contributory contributions.

I'll just quote it.

Payment #2: to you for any after tax contributions you made to the SRP after 1985 - this payment is eligible to be rolled over, but is required to be treated as a separate transaction.

This payment #2 is not a huge amount - in fact it's 1.4% of the rollover we're making. And as I understand it I have to do some rather complicated accounting when we start making withdrawals in a few years, correct?

I'm inclined to keep check #2 and do something out of character with it. Or maybe just put it in regular savings. But I want to confirm that there are no tax implications if we just cash that check, correct? But there would be accounting issues if we do roll it over with check #1, correct?

Thanks in advance.

 

[foxfirev5]

I am looking at a similar situation when I finally retire in '14. I will not be able to rollover my after tax contributions plus the appreciation of those funds and must take a distribution. In my situation I could take it now but must also pay tax on the appreciation above the amount I contributed. Are you sure it is just your after tax contributions and not any appreciation that you would be accepting?
In addition a 10% penalty applies since I'm under 59 1/2 and haven't retired yet.
At this point my plan is to retire at 58 , and not rollover the 401k until after retirement. Since I am over 55 and retired at that point the 10% penalty won't apply.
Even if I could I don't think I would try to comingle the after tax w/ pretax funds. Particularly if the amount is not very great.

 

[Alan]

If it were me I wouldn't co-mingle it with the before-tax 401k, just to keep things simple.

I would probably use it to make contributions to a ROTH over the next couple of years. If you earn too much for ROTH contributions then make tIRA contributions and immediately do ROTH conversions (the so named backdoor ROTHs).

If you are already maxing out your IRA contributions then go spend it on yourselves

 

[SumDay]

Thanks for the confirmations. I'm maxing out my 401(k) contributions, and DH is doing the same to his IRA, so.... can you say CRUISE?

 

[pb4uski]

I wonder if it can be rolled over into a Roth like after-tax balances in a 401k can? Might be worth checking into.

 

[travelover]

I wonder if it can be rolled over into a Roth like after-tax balances in a 401k can? Might be worth checking into.

I'd post the question over at Fairmark and address it to Alan S. It is a complicated process and a grey area of the law.

 

[Alan]

Thanks for the confirmations. I'm maxing out my 401(k) contributions, and DH is doing the same to his IRA, so.... can you say CRUISE?

I wonder if it can be rolled over into a Roth like after-tax balances in a 401k can? Might be worth checking into.

I'd post the question over at Fairmark and address it to Alan S. It is a complicated process and a grey area of the law.

Pick a cruise that has internet available so you can post your question