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.