Rollover 401k from previous employer - two check question

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Elsebet
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Rollover 401k from previous employer - two check question

Post by Elsebet »

Hello Bogleheads!

I recently requested to close and rollover an old 401k account from my previous employer to Fidelity. I received two checks from my old employer; the bulk (99%) of the money was pre-tax and I sent this check today via Fidliety's mobile app to be deposited into my current employer's 401k with no issue. However I have a second small check, the amount on it is described as "After Tax EE Contributions" - I assume since it is after tax I would be unable to roll it into my current employer's 401k. I have a Rollover IRA, Roth IRA, and normal brokerage account at Fidelity, which of these accounts do I need to roll this smaller check into? My intuition says "Roth IRA" but I've never done a rollover to my Roth IRA before, just 401k or Rollover IRA. It is made out to Fidelity with f/b/o in my name just like the pre-tax check.
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca
pkcrafter
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Re: Rollover 401k from previous employer - two check question

Post by pkcrafter »

Elsebet wrote: Mon May 10, 2021 1:34 pm Hello Bogleheads!

I recently requested to close and rollover an old 401k account from my previous employer to Fidelity. I received two checks from my old employer; the bulk (99%) of the money was pre-tax and I sent this check today via Fidliety's mobile app to be deposited into my current employer's 401k with no issue. However I have a second small check, the amount on it is described as "After Tax EE Contributions" - I assume since it is after tax I would be unable to roll it into my current employer's 401k. I have a Rollover IRA, Roth IRA, and normal brokerage account at Fidelity, which of these accounts do I need to roll this smaller check into? My intuition says "Roth IRA" but I've never done a rollover to my Roth IRA before, just 401k or Rollover IRA. It is made out to Fidelity with f/b/o in my name just like the pre-tax check.
The way you should have done the transfer was a direct custodian to custodian transfer, that's the most efficient way. Now you must check to be sure your old 401k did not have taxes removed. If so, you will need to replace that amount too. I don't know about the after-tax, but it is was in the 401k, you might want to leave it there.

https://www.irs.gov/retirement-plans/ro ... ment-plans

https://finance.zacks.com/aftertax-ee-c ... -9712.html


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
MrJedi
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Re: Rollover 401k from previous employer - two check question

Post by MrJedi »

pkcrafter wrote: Mon May 10, 2021 2:18 pm
Elsebet wrote: Mon May 10, 2021 1:34 pm Hello Bogleheads!

I recently requested to close and rollover an old 401k account from my previous employer to Fidelity. I received two checks from my old employer; the bulk (99%) of the money was pre-tax and I sent this check today via Fidliety's mobile app to be deposited into my current employer's 401k with no issue. However I have a second small check, the amount on it is described as "After Tax EE Contributions" - I assume since it is after tax I would be unable to roll it into my current employer's 401k. I have a Rollover IRA, Roth IRA, and normal brokerage account at Fidelity, which of these accounts do I need to roll this smaller check into? My intuition says "Roth IRA" but I've never done a rollover to my Roth IRA before, just 401k or Rollover IRA. It is made out to Fidelity with f/b/o in my name just like the pre-tax check.
The way you should have done the transfer was a direct custodian to custodian transfer, that's the most efficient way. Now you must check to be sure your old 401k did not have taxes removed. If so, you will need to replace that amount too. I don't know about the after-tax, but it is was in the 401k, you might want to leave it there.

https://www.irs.gov/retirement-plans/ro ... ment-plans

https://finance.zacks.com/aftertax-ee-c ... -9712.html


Paul
Many direct rollovers are done this way with the paper check and F.B.O. designation on the check instead of being written to the person. I've done a few of these and there has never been a way to accidentally withhold taxes. The plans I've been a part of didn't provide a way to not receive the paper check, but this still counts as a direct rollover if the F.B.O. is used.

If I understand the situation correctly, I believe you can roll the after tax check directly into a Roth IRA without any additional tax.
go2run
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Re: Rollover 401k from previous employer - two check question

Post by go2run »

Elsebet wrote: Mon May 10, 2021 1:34 pm Hello Bogleheads!

I recently requested to close and rollover an old 401k account from my previous employer to Fidelity. I received two checks from my old employer; the bulk (99%) of the money was pre-tax and I sent this check today via Fidliety's mobile app to be deposited into my current employer's 401k with no issue. However I have a second small check, the amount on it is described as "After Tax EE Contributions" - I assume since it is after tax I would be unable to roll it into my current employer's 401k. I have a Rollover IRA, Roth IRA, and normal brokerage account at Fidelity, which of these accounts do I need to roll this smaller check into? My intuition says "Roth IRA" but I've never done a rollover to my Roth IRA before, just 401k or Rollover IRA. It is made out to Fidelity with f/b/o in my name just like the pre-tax check.
I would call your plan administrator and ask. I did this with a previous roll-over when there was a split between pre-tax and post-tax amounts. The pre-tax went into a rollover IRA and the post tax went into a Roth. That what their feedback and how they directed it when transferred to Vanguard.
RetiredAL
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Re: Rollover 401k from previous employer - two check question

Post by RetiredAL »

Elsebet wrote: Mon May 10, 2021 1:34 pm Hello Bogleheads!

I recently requested to close and rollover an old 401k account from my previous employer to Fidelity. I received two checks from my old employer; the bulk (99%) of the money was pre-tax and I sent this check today via Fidliety's mobile app to be deposited into my current employer's 401k with no issue. However I have a second small check, the amount on it is described as "After Tax EE Contributions" - I assume since it is after tax I would be unable to roll it into my current employer's 401k. I have a Rollover IRA, Roth IRA, and normal brokerage account at Fidelity, which of these accounts do I need to roll this smaller check into? My intuition says "Roth IRA" but I've never done a rollover to my Roth IRA before, just 401k or Rollover IRA. It is made out to Fidelity with f/b/o in my name just like the pre-tax check.
When I retired and closed out the 401K, I rolled the 401K pre-tax into a Roll-over IRA and the 401K post-tax into my Roth. Since the post-tax has no tax liability to it, it could go into taxable, but IMO that is a waste of Roth potential. I say put into your Roth, just make sure it's goes in as a rollover from another plan, not as a contribution. Fidelity's paper deposit form has a checkbox for "direct corp rollover - 401K". I would expect the mobile deposit to be similar. Yours is a direct rollover because the check is "FBO You".
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Elsebet
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Re: Rollover 401k from previous employer - two check question

Post by Elsebet »

Thanks all, I used the Fidelity Mobile app to deposit the second small after-tax check as a direct rollover to my Roth IRA. I appreciate the advice from all the posters, thank you. Fidelity's mobile app made this super easy, although I wish the help on their website was a little more clear. Anytime I typed rollover when on my account page it just kept trying to have me open a new account, almost as if it didn't realize I already had one.
"...the man who adapts himself to his slender means and makes himself wealthy on a little sum, is the truly rich man..." ~Seneca
Alan S.
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Re: Rollover 401k from previous employer - two check question

Post by Alan S. »

Elsebet wrote: Mon May 10, 2021 5:35 pm Thanks all, I used the Fidelity Mobile app to deposit the second small after-tax check as a direct rollover to my Roth IRA. I appreciate the advice from all the posters, thank you. Fidelity's mobile app made this super easy, although I wish the help on their website was a little more clear. Anytime I typed rollover when on my account page it just kept trying to have me open a new account, almost as if it didn't realize I already had one.
Just to be sure Fidelity codes these rollover checks correctly, check your account in a day or two to make sure they both show as rollover contributions as in Box 2 of the Form 5498 below, not as a conversion (Box 3) or a regular contribution (Box 1):

https://www.irs.gov/pub/irs-pdf/f5498.pdf
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