QUESTION:
I had a question I was not sure if you can answer. If a client rolls over after -tax IRA money into a SoloK traditional bucket, can they then do an in-plan conversion of that after-tax money into the Roth Solo(k) without incurring any taxes?
ANSWER:
Unfortunately, neither Roth IRAs nor after-tax funds in non-deductible IRA can be transferred to a solo 401k plan. This is outlined in IRS Publication 590.
QUESTION:
Ex: client has $50k in an IRA of which $25k is after-tax and $25k is pre-tax. She opens a SoloK and rolls over $25k and converts that to Roth SoloK bucket. Is that possible to do without taxes?
ANSWER:
Yes, the pretax portion can be transferred to the solo 401k and then converted to the Roth solo 401k designated account; however, the basis in the after-tax IRA cannot be transferred to the solo 401k, but can be converted to a Roth IRA.
She currently has after tax IRA money that she wants to get into a SoloK Roth. Not possible to transfer the basis unfortunately.
QUESTION:
An unrelated note: we are still not able to roll Roth IRA into Roth SoloK unless the Roth IRA originated from a 401K plan correct?
ANSWER:
Not only can you not rollover Roth IRA funds to the Roth solo 401k, a Roth IRA that was funded via a Roth 401k direct-rollover cannot later be transferred to a qualified plan including a roth 401k such as a roth solo 401k.