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vkg wrote,

The conversion of the 401K after-tax needs to be done before the roll-over.

To which aj485 wrote, No, you can roll the after-tax contributions in a 401(k) directly to a Roth IRA.

In fact the IRS permits you to split any after-tax contributions (cost-basis) from the earnings when you roll the funds out of a 401(k). So if you call your 401(k) provider and ask for a rollover of after-tax funds, you should have the option to rollover the original contributions to a Roth IRA and simultaneously roll any earnings into a Traditional IRA.

I know for a fact that Fidelity is capable to executing such a rollover. This shouldn't require any input from your (previous) employer and it shouldn't be something the plan has to explicitly permit.

The IRS actually issued a notice about this ability in 2014. https://www.irs.gov/pub/irs-drop/n-14-54.pdf

In addition this fact is covered here in on the IRS website: https://www.irs.gov/retirement-plans/rollovers-of-after-tax-...

Specifically this page says:

Can I roll over my after-tax contributions to a Roth IRA and the earnings on my after-tax contributions to a traditional IRA?

Yes. Earnings associated with after-tax contributions are pretax amounts in your account. Thus, after-tax contributions can be rolled over to a Roth IRA without also including earnings. Under Notice 2014-54, you may roll over pretax amounts in a distribution to a traditional IRA and, in that case, the amounts will not be included in income until distributed from the IRA.


This splitting of contribution amounts from the earnings allows you to avoid incurring additional taxes on future earnings without incurring any additional taxes in the current tax year.

- Joel
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