IRS clarifies Roth conversion rule on after-tax 401(k) rollovers

Marilyn Brohm |

The IRS has issued Notice 2014-54 that states you can directly roll after-tax contributions from a 401(k), 403(b) and 457 plan to a Roth IRA beginning 1/1/2015. This rollover will no longer be considered a pro-rata conversion of pre-tax dollars and after-tax dollars.

The notice states: The applicability date of the regulations is proposed to be Jan. 1, 2015. However, in accordance with § 7805(b)(7), taxpayers are permitted to apply the proposed regulations to distributions made before the applicability date, so long as such earlier distributions are made on or after Sept. 18, 2014.