Bringing Rollover IRA into a 401k Plan

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an_asker
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Bringing Rollover IRA into a 401k Plan

Post by an_asker »

I am wrestling with this issue for the last couple of weeks. Because of the end of the year, haven't really tried calling my account custodians to have a good pow-wow. Besides, and this is the first real complaint I have ever had against Schwab, I am having a tough time finding a knowledgeable rep the couple times I really managed to get through.

This question is mainly for those who have personally done this in the recent past* --> transferred money from a rollover IRA into a current or previous employers' 401k account. What was the minimum paperwork that the 401k custodian needed from you?

My problem is that my rollover IRAs are really old and Schwab (the custodian) is claiming that they cannot certify that the money being moved out is all pre-tax. This certification, apparently, is what my 401k custodian wants - I say apparently because I have still talked with only one person at the 401k.

My complaint about Schwab is that once I got the above response from the toll-free rep, I thought I might as well talk with the local office dude. This person literally laughed at me and said that what I was saying was not possible (that I could not move money from a rollover IRA into a 401k). :oops: It was not like, no I don't think that cannot be done. It was like, literally, no you cannot do it he he he!!

* apparently there has been a rule change (I don't know since when); previously rollover IRAs would exclusively contain tax-deferred i.e. pre-tax money. However, since the rule change, it appears that folks can contribute (may be not start but add) post-tax money into a rollover IRA as well.
mhalley
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Re: Bringing Rollover IRA into a 401k Plan

Post by mhalley »

I don’t think you can do that to an ira. Probably you are thinking of adding post tax to an ira then rolling it to an ira.
As for the local office dude, he obviously is not well versed and you need to escalate to a supervisor.
Makefile
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Re: Bringing Rollover IRA into a 401k Plan

Post by Makefile »

an_asker wrote: Sun Jan 03, 2021 9:31 am This question is mainly for those who have personally done this in the recent past* --> transferred money from a rollover IRA into a current or previous employers' 401k account. What was the minimum paperwork that the 401k custodian needed from you?
My 401(k) provider let me self-certify that I was only rolling in pre-tax money. I believe there was a change in the rules at some point that allowed this self-certification. "Basis isolation" in order to do a backdoor Roth requires the ability to do that. An account statement establishing that it was a traditional IRA was enough. It sounds like your 401(k) provider wants more of a paper trail.
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anon_investor
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Re: Bringing Rollover IRA into a 401k Plan

Post by anon_investor »

Makefile wrote: Sun Jan 03, 2021 2:10 pm
an_asker wrote: Sun Jan 03, 2021 9:31 am This question is mainly for those who have personally done this in the recent past* --> transferred money from a rollover IRA into a current or previous employers' 401k account. What was the minimum paperwork that the 401k custodian needed from you?
My 401(k) provider let me self-certify that I was only rolling in pre-tax money. I believe there was a change in the rules at some point that allowed this self-certification. "Basis isolation" in order to do a backdoor Roth requires the ability to do that. An account statement establishing that it was a traditional IRA was enough. It sounds like your 401(k) provider wants more of a paper trail.
Similar experience when I rollover my traditional IRA from Vanguard to my 401k. Vanguard confirmed it was a traditional IRA and on the form from my 401k I signed, I certified it was only pre-tax funds were being rolled over. Although my 401k accepts both traditional IRAs from 401k rollovers and regular traditional IRAs where personal contributions have been made. I did have after-tax basis in my traditional IRA, but I chose to convert that dollar amount to roth before doing the rollovers (it was less than $1k so if something did not workout with the rollover to 401k the tax would not have been huge). My 401k accepted all my rollover funds and I paid no tax on my after tax basis converted to roth ($0 pretax IRA balances by 12/31 that year).
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celia
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Re: Bringing Rollover IRA into a 401k Plan

Post by celia »

an_asker wrote: Sun Jan 03, 2021 9:31 am This question is mainly for those who have personally done this in the recent past* --> transferred money from a rollover IRA into a current or previous employers' 401k account. What was the minimum paperwork that the 401k custodian needed from you?
I transferred money from a rollover IRA to my pension plan (to buy extra years of service) about 10 years ago. For the pension, they mainly needed confirmation that I had recently retired. Since there was a 60-day window where everything had to be completed and it was around the holidays, I went in to work to find someone authorized to sign that I had retired. If I had mailed the form back, I was afraid it would be stuck under a pile of paperwork someplace or even lost.

If you don't have a current 401K account in the employer's plan, I doubt that they will open one now. Not only do you have to be a current employee, but often you have a waiting period before you can start contributions.
My problem is that my rollover IRAs are really old and Schwab (the custodian) is claiming that they cannot certify that the money being moved out is all pre-tax. This certification, apparently, is what my 401k custodian wants - I say apparently because I have still talked with only one person at the 401k.
This was my situation too, at Vanguard. They were even the custodian for the previous employer's 401K and I didn't make transactions in the rollover IRA. It was just their policy to not get involved in certifying this. So I asked the pension plan what to do and they told me I could self-certify by writing a sentence (and signing it) to that effect.
My complaint about Schwab is that once I got the above response from the toll-free rep, I thought I might as well talk with the local office dude. This person literally laughed at me and said that what I was saying was not possible (that I could not move money from a rollover IRA into a 401k). :oops: It was not like, no I don't think that cannot be done. It was like, literally, no you cannot do it he he he!!
I would probably have laughed too, if I knew you called me a "dude" on a business call. Both of you should have acted professionally. Take the upper road next time and ask to speak to a supervisor or manager.
* apparently there has been a rule change (I don't know since when); previously rollover IRAs would exclusively contain tax-deferred i.e. pre-tax money. However, since the rule change, it appears that folks can contribute (may be not start but add) post-tax money into a rollover IRA as well.
You can NEVER roll pre-tax post-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.

Edit: typo
Last edited by celia on Sun Jan 03, 2021 5:28 pm, edited 1 time in total.
Topic Author
an_asker
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Re: Bringing Rollover IRA into a 401k Plan

Post by an_asker »

celia wrote: Sun Jan 03, 2021 3:32 pm
My complaint about Schwab is that once I got the above response from the toll-free rep, I thought I might as well talk with the local office dude. This person literally laughed at me and said that what I was saying was not possible (that I could not move money from a rollover IRA into a 401k). :oops: It was not like, no I don't think that cannot be done. It was like, literally, no you cannot do it he he he!!
I would probably have laughed too, if I knew you called me a "dude" on a business call. Both of you should have acted professionally. Take the upper road next time and ask to speak to a supervisor or manager.
No I didn't call him "dude" to his face :D :D
* apparently there has been a rule change (I don't know since when); previously rollover IRAs would exclusively contain tax-deferred i.e. pre-tax money. However, since the rule change, it appears that folks can contribute (may be not start but add) post-tax money into a rollover IRA as well.
You can NEVER roll pre-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.
[/quote]
Huh? 401ks typically accept moneys from previous 401ks. Those are all usually pre-tax only.

In this case, there is just the middle step of rollover (aka conduit) IRA. The proposed (complete) flow is:

401k (employer X) --> rollover IRA (current status; with Schwab) --> 401k (employer Y)

The following is always allowed (assuming current custodian of 401k/the plan itself, allows it):

401k (old employer X) --> 401k (current employer Y)
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anon_investor
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Re: Bringing Rollover IRA into a 401k Plan

Post by anon_investor »

celia wrote: Sun Jan 03, 2021 3:32 pm You can NEVER roll pre-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.
This is wrong. To the best of my knowledge You can only rollover pre-tax funds into a 401k. Any other kind of funds would be an issue.
MindBogler
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Re: Bringing Rollover IRA into a 401k Plan

Post by MindBogler »

I recently did this with a Fidelity 401k as the destination. I had Rollover IRA assets at Vanguard from previous 401ks. I did not have to send Fidelity any information. All I did was certify the quantity being rolled into the plan was all pre-tax via a check box and hit Submit.
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an_asker
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Re: Bringing Rollover IRA into a 401k Plan

Post by an_asker »

anon_investor wrote: Sun Jan 03, 2021 4:56 pm
celia wrote: Sun Jan 03, 2021 3:32 pm You can NEVER roll pre-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.
This is wrong. To the best of my knowledge You can only rollover pre-tax funds into a 401k. Any other kind of funds would be an issue.
That is my understanding as well. Though I don't get why it should be the responsibility of the custodian. I mean, if I make the mistake of bringing after tax into a 401k without documentation, wouldn't it be an issue for me - I would be paying taxes TWICE on that money!!
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an_asker
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Re: Bringing Rollover IRA into a 401k Plan

Post by an_asker »

MindBogler wrote: Sun Jan 03, 2021 5:17 pm I recently did this with a Fidelity 401k as the destination. I had Rollover IRA assets at Vanguard from previous 401ks. I did not have to send Fidelity any information. All I did was certify the quantity being rolled into the plan was all pre-tax via a check box and hit Submit.
That's really nice to know. I will call Fidelity (this is where DW's ex-exployer 401k is housed) tomorrow to see if a) they accept rollovers into it (my ex-employer 401k does) and b) if the process is still as simple.

[edited to add]: If it helps, this thread represents the big picture, though I just realized that DW has had five not four 401ks :oops:
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anon_investor
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Re: Bringing Rollover IRA into a 401k Plan

Post by anon_investor »

an_asker wrote: Sun Jan 03, 2021 5:19 pm
anon_investor wrote: Sun Jan 03, 2021 4:56 pm
celia wrote: Sun Jan 03, 2021 3:32 pm You can NEVER roll pre-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.
This is wrong. To the best of my knowledge You can only rollover pre-tax funds into a 401k. Any other kind of funds would be an issue.
That is my understanding as well. Though I don't get why it should be the responsibility of the custodian. I mean, if I make the mistake of bringing after tax into a 401k without documentation, wouldn't it be an issue for me - I would be paying taxes TWICE on that money!!
I think it screws up some 401k safe harbor or protections that the employer gets. But in any case , I am sure celia misread my post and got confused. I only rolled pre-tax funds from my traditional IRA into my 401k. My plan allows for a roll in over any pre-tax traditional IRA (not just funds originating from a 401k rollover to a traditional IRA).
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celia
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Re: Bringing Rollover IRA into a 401k Plan

Post by celia »

an_asker wrote: Sun Jan 03, 2021 5:19 pm
anon_investor wrote: Sun Jan 03, 2021 4:56 pm
celia wrote: Sun Jan 03, 2021 3:32 pm You can NEVER roll pre-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.
This is wrong. To the best of my knowledge You can only rollover pre-tax funds into a 401k. Any other kind of funds would be an issue.
That is my understanding as well. Though I don't get why it should be the responsibility of the custodian. I mean, if I make the mistake of bringing after tax into a 401k without documentation, wouldn't it be an issue for me - I would be paying taxes TWICE on that money!!
Thank you both for pointing out my typo. I've corrected it above. (I crossed out "pre-tax" and replaced it with "post-tax".) Those who have read my numerous posts on fixing up Backdoor Roth errors, will know that it what I meant.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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an_asker
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Re: Bringing Rollover IRA into a 401k Plan

Post by an_asker »

celia wrote: Sun Jan 03, 2021 5:39 pm [...]
Thank you both for pointing out my typo. I've corrected it above. (I crossed out "pre-tax" and replaced it with "post-tax".) Those who have read my numerous posts on fixing up Backdoor Roth errors, will know that it what I meant.
Haha no worries. I have read your posts I'm sure (though I cannot realistically remember who exactly said what on which thread) and so am aware of your financial knowledge, which is why I was a bit taken aback that did I really misunderstand?
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anon_investor
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Re: Bringing Rollover IRA into a 401k Plan

Post by anon_investor »

celia wrote: Sun Jan 03, 2021 5:39 pm
an_asker wrote: Sun Jan 03, 2021 5:19 pm
anon_investor wrote: Sun Jan 03, 2021 4:56 pm
celia wrote: Sun Jan 03, 2021 3:32 pm You can NEVER roll pre-tax money into a 401K. If the custodian is aware that has happened, the plan might become "unqualified" and will ask you to remove it.

However, some 401Ks allow the current EMPLOYEES to make after-tax or Roth contributions.
This is wrong. To the best of my knowledge You can only rollover pre-tax funds into a 401k. Any other kind of funds would be an issue.
That is my understanding as well. Though I don't get why it should be the responsibility of the custodian. I mean, if I make the mistake of bringing after tax into a 401k without documentation, wouldn't it be an issue for me - I would be paying taxes TWICE on that money!!
Thank you both for pointing out my typo. I've corrected it above. (I crossed out "pre-tax" and replaced it with "post-tax".) Those who have read my numerous posts on fixing up Backdoor Roth errors, will know that it what I meant.
Thanks for all your contributions to the forum Celia!
Ingen Ko
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Re: Bringing Rollover IRA into a 401k Plan

Post by Ingen Ko »

I did an indirect rollover this year from a 100% pre-tax Vanguard IRA to my Fidelity 403(b). Ended up being less paperwork and faster than doing a direct rollover. All it took was a couple of mouse clicks, two phone calls, and the pucker factor of having the money sit in my checking account for a few days.
Havoner
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Re: Bringing Rollover IRA into a 401k Plan

Post by Havoner »

Sorry this one can really be a headache to do luckily it is something you will likely only need to do once. Mine was with Vanguard and not with Schwab but here is the paperwork. The first thing is explaining to the helpful people on the phone that you want to roll an IRA into a traditional 401k and not Roll a 401k into an IRA. Seems like this takes about 10 minutes to explain to them and find the right people. Here are the two sides of this transaction and the three steps I took. Good luck, Be persistent! This one time trick makes life so much easier with the backdoor Roth IRA pro-rata rules.
:sharebeer

1.Determine right pre-tax/traditional 401k account number you want to role it over into. Notify Schwab the approximate amount and ask them how the check needs to be made out. It should be made out to the institution care of the account be careful not to take a check or anything in your own name that might trigger a distribution.

2.Now you need to call the company holding your IRA and let them know that you would like to close your account and to make out the check in the fashion needed by Schwab. They should be able to make a comment or statement about it being pre-tax money if needed. Confirm with this company when they send the check.

3.Either monitor the Schwab account or call them to check when it will post and that they have everything they need. Really helps to stay on top of them.
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an_asker
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Re: Bringing Rollover IRA into a 401k Plan

Post by an_asker »

Havoner wrote: Sun Jan 03, 2021 6:02 pm Sorry this one can really be a headache to do luckily it is something you will likely only need to do once. Mine was with Vanguard and not with Schwab but here is the paperwork. The first thing is explaining to the helpful people on the phone that you want to roll an IRA into a traditional 401k and not Roll a 401k into an IRA. Seems like this takes about 10 minutes to explain to them and find the right people. Here are the two sides of this transaction and the three steps I took. Good luck, Be persistent! This one time trick makes life so much easier with the backdoor Roth IRA pro-rata rules.
[...]
Thanks - that is exactly what I plan to do, except you've got it backwards - in my case, Schwab has the Rollover IRA. :-)
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an_asker
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Re: Bringing Rollover IRA into a 401k Plan

Post by an_asker »

Quick Update:

I am halfway done with my Rollover IRA --> 401k; and just about getting started with doing the same on DW's Rollover IRA.

To recap: the Rollover IRAs that we are seeking to bring over to our respective 401ks, were originally pre-tax 401k moneys from previous employers. I had originally been worried about needing some major certification about pretax vs post-tax. No such issue arose. I first started with a three-figure amount but have now progressed up to five figure amounts. I am doing the transfer in pieces so we are out of the market the least amount of time.
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