My goal is to contribute more in after-tax dollars to my 401k plan and roll that into a Roth IRA. But I can't find anything that describes how much or how often. Can I move all my after-tax contributions a year later into a Roth IRA?
How does the pro rata rule related to this, do I have to contribute a fixed % of pre/post tax dollars?
I have never heard of a limit regarding how much you can roll over from your after-tax 401(k), beyond the contribution limits that dictate how much you can accumulate. If there was, it would be a limitation by your company or 401(k) provider, not the IRS. Same goes for how often you can do a rollover; there are sometimes limits (e.g. I've heard twice a year) from your company or 401(k) provider, but the IRS doesn't care. You'll want to do rollovers as frequently as is allowed or practical (ideally immediately after each contribution) so the gains are in a Roth versus pre-tax account.
Whenever you do an after-tax rollover (which will almost always be for the entire after-tax balance), there is a pro rata rule that says a proportional amount must come from the pre-tax and after-tax balances, as discussed by the IRS here:
Can I roll over just the after-tax amounts in my retirement plan to a Roth IRA and leave the remainder in the plan?
No, you can’t take a distribution of only the after-tax amounts and leave the rest in the plan. Any partial distribution from the plan must include some of the pretax amounts. Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account. To roll over all of your after-tax contributions to a Roth IRA, you could take a full distribution (all pretax and after-tax amounts), and directly roll over:
- pretax amounts to a traditional IRA or another eligible retirement plan, and
- after-tax amounts to a Roth IRA.
In general, you cannot do a rollover of 401(k) assets into an IRA, whether Traditional or Roth, until after you have left the company (or possibly have turned 59.5 years of age while still being employed by the company). The IRS says in its Resource Guide for 401(k) participants (last updated August 27, 2017) that
Generally, distributions of elective deferrals cannot be made until one of the following occurs:
- You die, become disabled, or otherwise have a severance from employment.
- The plan terminates and no successor defined contribution plan is established or maintained by the employer.
- You reach age 59½ or incur a financial hardship.
To my mind, "I want to roll over my 401(k) money into an IRA" does not qualify under any of these criteria but others obviously have a different opinion or have read the US Tax Code and are aware that this reason is an allowable exception to what the IRS states is the general rule.
Be that as it may, once you are eligible to do a rollover, be aware that any distributions from your 401(k) are automatically subject to the pro-rata rules, and you cannot just withdraw your after-tax contributions from the nonRoth part of your 401(k); each withdrawal will consist partly of taxable money and partly of nontaxable money.
