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URL:  http://boards.fool.com/it-is-my-understanding-that-i-can-contribute-up-30908803.aspx

Subject:  Re: After-Tax in-service rollover to Roth? Date:  10/6/2013  12:32 PM
Author:  aj485 Number:  73457 of 76080

It is my understanding that I can contribute up to $51,000 to a combination of my 401(k) and After-Tax accounts with my employer. My employer caps After-Tax (non-Roth) to 16% of pay. I am allowed to perform in-service withdrawals on After-Tax funds on a day-after basis. I understand that I can then transfer this to a Rollover Roth IRA account, allowing me to contribute more than the $5,500 limit into this.

I would suggest asking over on the Tax Strategies board http://boards.fool.com/tax-strategies-100155.aspx?mid=309083... and at Fairmark www.fairmark.com

Here is an article that suggested the strategy you are considering, but the update indicates that the IRS may treat rollovers to a Roth of after-tax amounts from 401(k)s by using the same pro-rated rules as IRAs do. http://www.kiplinger.com/article/retirement/T046-C000-S002-a...

Here is an article from Fairmark that indicates that it is possible to bypass the pro-rating rules if your after tax contributions are in a separate sub-account within the 401(k) http://fairmark.com/retirement/roth-accounts/roth-conversion... You would need to ensure you understand how your employer's 401(k) plan is set up to know if this applies to you.

Additionally, I would strongly suggest consulting a tax practitioner, like an enrolled agent or a tax attorney, to get their opinion on your particular situation before you implement this strategy, rather than relying on information from message boards and articles.

2. If I'm wrong about this being a loophole, there could be penalties that negate the benefits (why I'm posting here).

Yep - at a minimum, there would be 6% excess contribution penalty for each year you leave the excess contribution issue uncorrected.

AJ
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