Backward Rollover IRA *TO*401K questions

[Mother Fussbudget]

Here's a question for the tax and/or IRA experts.  I realize that most people roll their old 401K's into Rollover IRA's for the flexibility it provides in picking your investments.  And I have done exactly this.  Four (4x) times.  Always into the SAME rollover t-IRA.

I'm considering doing a REVERSE rollover FROM this existing IRA *INTO* my current company's 401K plan.
GOAL:  lower the taxable percentage of the t-IRA funds when converted to Roth IRA by lowering my total t-IRA holdings.  Convert all 401K funds to Roth IRA after I reach FIRE in 2018.
 
Many events have happened to this t-IRA (rollover) account including:
1) Initial 401K rollover contribution from company "A" of $360. (2003)
2) Capital losses in the account from the dot-com-bust (-$200K).
3) Additional 401K rollover contribution from company "B" of $9K.
4) Additional 401K rollover contribution from company "C" of $24K.
5) Additional 401K rollover contribution from company "D" of $14K.
6) A taxed distribution/withdrawal of $50K.
7) A taxed distribution/withdrawal of $24K.
8) Additional CASH (after tax) contributions of $6.5K

Current value: 
Rollover t-IRA $166K
Two (2x) Roth IRA's:  1) $22K,  2) $14K

Q:  Considering the current Rollover t-IRA balance less than the initial contribution because of capital losses,
Can I roll the entire current balance over to my company 401K without paying additional taxes and/or penalties?

[bacchi]

What do the capital losses have to do with it?

Roll over the after-tax contribution to a Roth IRA.

https://www.irs.gov/retirement-plans/rollovers-of-after-tax-contributions-in-retirement-plans

Then roll over the pre-tax contributions (everything that's left) to your 401k, if your employer permits it.

Really, though, why wouldn't you just do a regular Roth IRA ladder? The flow is 401k->Traditional IRA->Roth IRA.

A traditional and rollover IRA are the same.

[Quidnon?]

I'm no expert, but in my understanding you can roll 401k funds that were rolled into an IRA only so long as the ira in question has never had any funds from any other source.  However, my question is, why would you want to do this?  You can do the backdoor roth from that traditional ira just fine.  There is no advantage to rolling it all into another 401k, as far as I know.

[Mother Fussbudget]

However, my question is, why would you want to do this?  You can do the backdoor roth from that traditional ira just fine.  There is no advantage to rolling it all into another 401k, as far as I know.

It's something I'm considering.  One reason is I'm ineligible to make a direct Roth contribution.  Another, any IRA to Roth conversion would be taxed at a high rate because of the total amounts in IRA accounts.  Another, The Rule of 55 - can withdraw from a 401K penalty free after 55. 

A couple of good discussions:
https://www.nerdwallet.com/blog/investing/rollover-ira-to-401k/
http://forum.mrmoneymustache.com/taxes/has-anyone-performed-a-traditional-ira-roll-in-to-an-employer-401k/

As for the capital losses, doesn't that lower my basis for the IRA account?

[Quidnon?]

However, my question is, why would you want to do this?  You can do the backdoor roth from that traditional ira just fine.  There is no advantage to rolling it all into another 401k, as far as I know.

It's something I'm considering.  One reason is I'm ineligible to make a direct Roth contribution. 

Doesn't matter, there is no difference in the backdoor roth rollover because it comes from a traditional ira versus a 401k.

Another, any IRA to Roth conversion would be taxed at a high rate because of the total amounts in IRA accounts.

Um, why?

  Another, The Rule of 55 - can withdraw from a 401K penalty free after 55. 

This one makes sense, but keep in mind that rolled over funds may have to age for 5 years inside the 401k before they qualify.  I'm not certain about this.

As for the capital losses, doesn't that lower my basis for the IRA account?

Sometimes, but how does that matter if you are using a 401k as the intermediary?

[Systems101]

Another, any IRA to Roth conversion would be taxed at a high rate because of the total amounts in IRA accounts.

Um, why?

Because of the "pro-rata" rule.  *Note: The rules have changed over the last 3 years, and there were some impacts to whether the pro-rata is universal as it once was (it used to be irrelevant whether they were separate IRAs or separate custodian - the basis for conversion was pro-rata regardless).  I am neither lawyer nor tax expert, so can't speak to the exact rules.  Having said that, getting down to $0 at the end of year in traditional IRAs avoids the confusion and form 8606 becomes very clear to fill out.

To the OP,

I don't know if there are special rules for a rollover IRA, so can't speak to that detail.  However, regardless of the losses, if it's possible, you can roll it over into the 401(k) (the company has to allow it as well).  It will all show up in the 401(k) as some form of before-tax contribution.

[seattlecyclone]

Here's a question for the tax and/or IRA experts.  I realize that most people roll their old 401K's into Rollover IRA's for the flexibility it provides in picking your investments.  And I have done exactly this.  Four (4x) times.  Always into the SAME rollover t-IRA.

I'm considering doing a REVERSE rollover FROM this existing IRA *INTO* my current company's 401K plan.
GOAL:  more easily start a backdoor Roth IRA ladder beginning after I reach FIRE in 2018.
 
Many events have happened to this t-IRA (rollover) account including:
1) Initial 401K rollover contribution from company "A" of $360. (2003)
2) Capital losses in the account from the dot-com-bust (-$200K).
3) Additional 401K rollover contribution from company "B" of $9K.
4) Additional 401K rollover contribution from company "C" of $24K.
5) Additional 401K rollover contribution from company "D" of $14K.
6) A taxed distribution/withdrawal of $50K.
7) A taxed distribution/withdrawal of $24K.
8) Additional CASH (after tax) contributions of $6.5K

Current value: 
Rollover t-IRA $166K
Two (2x) Roth IRA's:  1) $22K,  2) $14K

Q:  Considering the capital losses make the current Rollover t-IRA balance less than the initial contribution...
Can I roll the entire current balance over to my company 401K without paying additional taxes and/or penalties?

The capital losses don't matter. You have $6.5k of after-tax basis in there, and the rest is pre-tax. You may only roll the pre-tax amount to a 401(k), and only if your 401(k) accepts rollovers from this IRA. Some plans don't accept IRA rollovers at all, and others only accept rollovers from so-called "conduit IRAs," where the money came only from workplace plans and has not been added to since.

Another, any IRA to Roth conversion would be taxed at a high rate because of the total amounts in IRA accounts.

Um, why?

The pro-rata rule deems any Roth conversions to come proportionally from pre-tax and post-tax funds. In the case of Mother Fussbudget's IRA, the balance is approximately 96% pre-tax and 4% post-tax, so 96% of any Roth conversion would be taxed unless the pre-tax amount is first cleared out by moving it to a 401(k).

[terran]

I'm no expert, but in my understanding you can roll 401k funds that were rolled into an IRA only so long as the ira in question has never had any funds from any other source.  However, my question is, why would you want to do this?  You can do the backdoor roth from that traditional ira just fine.  There is no advantage to rolling it all into another 401k, as far as I know.

Quidnon?, I think you may have a misunderstanding about what a backdoor is. You can convert a tIRA into a r.IRA and pay the income tax on the conversion, but this is not a backdoor roth. A backdoor roth is when you contribute to a non-deductible tIRA (non-deductible because you're over the income limit under which you can deduct tIRA contributions), then roll this into a r.IRA. This is possible because of a few peculiarities of how the laws around IRAs are written: 1) r.IRAs have an income limit over which you are not allowed to contribute, 2) t.IRAs have an income limit over which you cannot deduct the contribution, but no income limit prohibiting contributions (afterall, why would you contribute to a non-deductible t.IRA you'll have to pay taxes on later), and 3) you can convert a t.IRA to a r.IRA whether or not it was deductible. This is the backdoor roth (contribute to non-deductible t.IRA then convert to r.IRA)

The reason you would not want any existing t.IRA accounts from rollovers or previous deductible t.IRA contributions is that any t.IRA to r.IRA conversion is considered to come from all t.IRA's a person holds in proportion to the size of the accounts, so if you try to convert that non-deductible t.IRA in a backdoor roth conversion, but have existing rollover or deductible t.IRAs, then you will pay tax on the conversion at your marginal rate when you'd really rather keep that tax deferred money as tax deferred until you retire to a lower marginal tax rate.

Mother Fussbudget, having losses in your IRA shouldn't really be a factor. The issue you need to figure out is whether you 401k allows incoming rollovers from IRAs. Talking to HR and/or getting the plan documents so you can read through them would be the thing to do.

[Quidnon?]

I see that I'm outside of my league here.  Please ignore me.

[Mother Fussbudget]

Thanks a million seattlecyclone.  That's exactly the information I was searching for. ;-)

[Mother Fussbudget]

One more question:  are the balances for *ALL* IRA accounts (both traditional and Roth) included when calculating the total amount for the pro-rata rule?

**EDIT**
Nevermind... I called Fidelity about something else, and got an answer to this question from them. 
Only Traditional IRA balances are included when calculating for the pro-rata amount.  Thanks to all, and

Happy New Year!

[terran]

All traditional, I think.