Author Topic: Vanguard won't rollover my tIRA into my 401(k)  (Read 1784 times)

Paul der Krake

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Vanguard won't rollover my tIRA into my 401(k)
« on: December 23, 2016, 05:23:56 PM »
I have about $20,000 in a Vanguard tIRA, all from voluntary deductible contributions in the last 3 years..

My wife also has about $40,000 in a Schwab tIRA, with about 60% from a previous 401(k) rollover, and the rest contributory. If that makes any difference, funds have been purchased and sold a couple times and there’s no way to know which is which.

We will most likely recharacterize 2016’s contributions to Roth as I do not think we will qualify for the deduction this year. Next year should see a massive boost in income, and there is a good chance, depending on my wife's job prospects, that we will be above the Roth IRA threshold for married filing jointly taxpayers. Effectively I have to get rid of roughly $50,000 of tIRA in order to do backdoor Roths in 2017.


I have a shiny new 401(k) at Vanguard. My wife will have a shiny 401(k) somewhere when she finds a job.

Vanguard informed me this morning that my 401(k) plan doesn’t want my tIRA monies, and only accept rollover IRAs. According to the rep, it is fairly common for employer plans to only accept monies from rollover IRAs and other employers' plans.

Here are the choices I have identified, in no particular order of feasibility or foolishness:

1) Try to make the 401(k) plan accept the tIRA monies. I would have to somehow convince a Vanguard rep to make a check payable to Vanguard, and hope that there’s poor internal communication and nobody notices.

2) Do a Roth conversion now on both tIRAs. I would then be advised to rush and do the conversion this year as our marginal tax rate is definitely increasing in 2017. I really dislike the idea of paying taxes on a $50k conversion. I would be paying taxes on the whole amount, not just the contributions, right? I don’t see how else they could assess the liability with my wife’s tIRA that has rollover and normal contributions.

3) Come up with self-employment income. Open solo 401(k) and rollover the tIRAs into it. I don't even need to have regular contributions into the solo 401(k), just use it for rollover purposes.

Can you guys think of other options, or any pitfalls I may have overlooked?

NinetyFour

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Re: Vanguard won't rollover my tIRA into my 401(k)
« Reply #1 on: December 24, 2016, 09:08:49 PM »
You might want to ask couponvan if she has any ideas.

seattlecyclone

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Re: Vanguard won't rollover my tIRA into my 401(k)
« Reply #2 on: December 24, 2016, 09:42:22 PM »
First off, don't trust the Vanguard rep. Look at the plan documentation and the rollover form. When I called Vanguard to roll my traditional IRA in there, they told me the same thing: that my plan only accepted money from a rollover IRA that hadn't been contaminated with outside funds. The rep was wrong. My plan does accept these rollovers and has done so from numerous employees on our internal financial advice mailing list. My IRA happened to be a rollover from a previous 403(b) so it would have been fine either way, but you should double-check the actual documents that govern your plan.

If you do discover that the rep was correct about your plan's limitations, I've heard many anecdotes that the Vanguard 401(k) people don't really talk to the Vanguard individual brokerage people. If you told the IRA people that you wanted a distribution for a 401(k) rollover to Vanguard, they probably wouldn't bat an eye, since Vanguard does in fact manage 401(k) plans that would accept rollovers from your IRA. For choice (1) to work, you'd then need to fill out the rollover form promising that the IRA money meets the plan's criteria, and hope they cash the check. I'm not suggesting that you actually break the rules of your plan, just that it might be possible to do so.

Paul der Krake

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Re: Vanguard won't rollover my tIRA into my 401(k)
« Reply #3 on: December 24, 2016, 10:41:13 PM »
Unfortunately, it looks like the Vanguard rep was right. My plan document explicitly prohibits IRA rollovers, and the rollover form basically requires acknowledgement that the funds are coming from a qualified retirement plan (basically something sponsored by an employer).

Now, what's stopping me from going the solo 401(k) route? Heck, I could even rollover into the solo 401(k), leave it sitting there for a while, and then transfer into my regular 401(k).

This article was particularly interesting:
https://thefinancebuff.com/solo-401k-self-employment.html

BlueHouse

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Re: Vanguard won't rollover my tIRA into my 401(k)
« Reply #4 on: December 25, 2016, 10:04:02 AM »
 
Last year I did exactly what you want to do.
I also could not rollover into a vg 401k. Luckily I did have my company solo 401k and rolled over to that, then converted after tax distros into Roth and I'll be continuing my back door Roths each year going forward.

I have a solo 401k through Paychex and it costs 250 per year but I think the set up fees may have been more expensive. Can't remember, sorry.

 

Wow, a phone plan for fifteen bucks!