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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 Nov 5 '15 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 Aug 26 '14 at 14:58
  • A rollover cannot happen if the 401k does not have any eligible distribution options, so I think the quote still holds water. To your first sentence, I indicated the intention to rollover and did not mention any other ways of taking a distribution such as withdrawal. I get that the simple answer is as you stated, I can make that more clear in my question if you think it is necessary. I'm really looking for actual experience or documentation to back up my own research and any research from the person answering. – zerpsed Aug 26 '14 at 15:46
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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 Aug 26 '14 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 Aug 26 '14 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 Aug 27 '14 at 8:11

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