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I have a Roth 401k from a prior employer and I want to roll it into a Roth IRA. For simplicity, let's assume there are no pre-tax employer match funds in the 401k, only my after tax contributions and earnings on those contributions.

I know my contributions can be rolled into the Roth IRA with no problem, but what about the earnings in the Roth 401k? Common sense and most of what I read indicates earnings should be rolled over with no adverse effects.

I find conflicting information on this, and so far have not found a straight answer. When I go through the rollover procedures on Fidelity's website, the transaction preview shows my contributions headed for my Roth IRA, and the earnings splitting off into a traditional IRA, or I am given the option to pay taxes on my earnings and convert them to Roth. This does not seem correct to me.

Quote from IRS:

The amount contributed to a designated Roth account is includible in gross income in the year of the contribution, but eligible distributions from the account (including earnings) are generally tax-free.

Is "generally tax-free" pretty loose?

Does anybody have a first-hand experience doing this kind of rollover? Bonus points if you managed to do it from a Fidelity-managed Roth 401k.

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    Just a follow up on this. I ended up giving up on the fidelity webapp, biting the bullet and calling fidelity. As Jared suspected, Fidelity had an error in their system, showing Roth earnings splitting off into a traditional ira. Calling to do the rollover was required. Roth 401k to roth ira rollover was executed with no problem.
    – zerpsed
    Commented Nov 5, 2015 at 20:45

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So first off, this should be handled as a rollover, not a "distribution". Rollovers have different rules than distributions. Therefore, your quote from the IRS does not apply. The simple answer is your entire Roth 401k amount can rollover to a Roth IRA with no penalties or taxes. If Fidelity is routing it differently then they're having an error in their system that you may need to speak with someone about.

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    +1 The OP says that for simplicity "let's assume there are no pre-tax employer match funds in the 401k". The employer match, if any exists and is vested, will roll over into a Traditional IRA that can be converted to a Roth IRA after paying taxes on the money.
    – Dilip Sarwate
    Commented Aug 26, 2014 at 14:58
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    @zerpsed A qualified distribution is a type of withdrawal. There are also non-qualified distributions, which is another type of withdrawal. IRS docs don't really use the term withdrawal since it would be ambiguous which of these you were referring to.
    – Jared
    Commented Aug 26, 2014 at 15:52
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    @zerpsed Yeah, not trying to be pedantic, just is helpful if you know the terminology they use so you'll know which sections apply (i.e. distribution vs. rollover). Anyway, don't forget to accept the answer unless you're waiting on additional feedback (if so either comment or clarify the quesiton).
    – Jared
    Commented Aug 26, 2014 at 16:04
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    I have a followup question about how the funds rolled over into the Roth IRA are treated. As I understand, withdrawal of rollovers in a Roth IRA is not taxable, and a penalty only applies within 5 years to the amount "that you had to include in income" (which according to your answer should be none). Does that mean I can rollover a Roth 401k (including contributions and earnings) to Roth IRA, and immediately withdraw it, without any tax or penalty?
    – user102008
    Commented Aug 27, 2014 at 8:11
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    @user102008 I ended up needing to know the answer to your question before withdrawing money from my Roth IRA. It took considerable research of IRS publications to find the answer. I did find it though; no citation at this point. The 5 year rule does not apply to contributions only but does apply to earnings. You actually have to look at the statements for your 401K to determine the contribution/earnings split that funded your Roth IRA via rollover. You can rollover and then immediately withdraw the contribution portion from the roll penalty free; not so with the earnings portion.
    – zerpsed
    Commented Oct 23, 2017 at 14:34

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