Has anyone performed a Traditional IRA Roll-in to an employer 401k?

[Connie]

I want to do a backdoor Roth IRA this year but I stupidly rolled my 401k into my Traditional IRA, so I'd have to pay taxes on most of the conversion. I did some research online and found out I can possibly roll my Traditional IRA into my new employer's 401k, thus emptying out my Traditional IRA so I can do the backdoor Roth IRA.

I've read that I need to basically take a distribution from my Trad IRA whereupon Vanguard will withhold taxes. Then how can I put the amount that was withhold in taxes into my new 401k? Then I need to fill out some tax forms so that it gets refunded. I'm pretty confused.

Has anyone done this before and was it a huge hassle?

[TomTX]

I just completed a rollover from my IRA to my employer's 401k. Wasn't that much of a hassle, filled out employer's forms and waited for TD Ameritrade to get it processed out. Took awhile to happen.

[genesismachine]

Generally, employer based plans are not very good. As an individual, you have much more freedom to choose a low fee index fund offered by a company such as Vanguard. Employer based plans generally have very few options, and many of them have high fees.

With my employer, I basically only have the choice of 2 index funds (neither of which have any global holdings) with low fees, and ~15 1-3% fee mutual funds. My personal IRA is held in Betterment.

[jorjor]

Generally, employer based plans are not very good. As an individual, you have much more freedom to choose a low fee index fund offered by a company such as Vanguard. Employer based plans generally have very few options, and many of them have high fees.

With my employer, I basically only have the choice of 2 index funds (neither of which have any global holdings) with low fees, and ~15 1-3% fee mutual funds. My personal IRA is held in Betterment.

Generally higher fees but not always the case, and potentially not in the case of the OP. Also, there is a very specific reason the OP wants to do this. They want to do a backdoor Roth conversion and will be taxed according to the pro-rata rule if they have traditional IRA assets, but will not be taxed if those assets are in a 401k.

I am in pretty much the same position as the OP. Traditional IRA funds (from a previous employer rollover) in Vanguard, would like to roll-into my current 401k (with fees no worse than the Vanguard funds I'm in) so I can avoid do a backdoor Roth to avoid the pro-rata rule. I'd appreciate anyone's insights.

[ToeInTheWater]

i was able to do this last year.  took a while to get all the correct forms, as our 401k provider wasn't very familiar with doing this (or WHY anyone would want to do this).  talk to both the company that manages your 401k and your IRA.

but, doable.  and back-door roth soon followed.  THAT was the easier part by far

b

[protostache]

I'm in the middle of this process right now with my solo 401(k), which I set up specifically to take advantage of the backdoor rules. I'm the admin so I can just do the roll in without any weird paperwork, and the mega backdoor is similarly easy since all I have to do is set up another account and send after-tax money to it. My CPA expressed concerns, but I think he's worried mostly about the timing. We're going to talk about it next week.

[seattlecyclone]

I did this last year. You should be able to get a distribution from your IRA custodian without having any taxes withheld, especially since this rollover is a non-taxable event.

The whole process was a bit of a hassle because my previous IRA custodian (WellsTrade) insisted on having my 401(k) custodian (Vanguard) generate a "letter of acceptance" to indicate that they would accept the rollover. WellsTrade wouldn't give me my money without it. Then they mailed me a check, which I had to forward to Vanguard with a form from their end. The whole process took about a month from liquidation of my IRA assets to purchase of funds in my 401(k).

Call the custodians on both sides of the transaction to see what their process will be to make sure you don't miss something they require and delay it even more.

[CanuckExpat]

My wife and I have both done this so we could do backdoor Roths: it was relatively straightforward in most cases. You don't need to have taxes withheld. The phone rep I talked to thought my 401k provider was a little slow answering my questions (I don't think many people do this), but I found the needed forms online.

My old provider was Fidelity, that was pretty straightforward. My wife's was provided essentially by her employer, I think we had one more step of paperwork, but not too bad.

[Connie]

Thanks for the replies guys! My rollover IRA is in Vanguard and my 401k is in Fidelity, so hopefully it will go smoothly. Fidelity does allow roll-in IRAs; it seems like I need to ask Vanguard to send Fidelity a check.

[PhysicianOnFIRE]

I did this 2 years ago in order to take advantage of the backdoor Roth.  I let representatives of both places know my intention and they gave me the appropriate forms to make it happen.

I am lucky in that my employer's 401(k) offers a number of Vanguard funds at institutional expense ratios.

[BlueHouse]

Yep, just finished the process late last year.  After finding out how easy it was (two one-page documents to sign), I'm a bit embarrassed that my own fear delayed my action for so long.   One part that surprised me was that the first time I called Vanguard to do this, the rep didn't understand why I wanted to do the reverse rollover into the 401k, and tried to talk me out of it.  She didn't understand about the Pro Rata rule. 

[jorjor]

Question to make sure I'm on board with how this works: Say I roll-in in a couple months from now. (Not in a super hurry because I'm filling up some other savings spaces first and I'd like to let the craziness in the markets settle before I am pulled out while in transit.) If I then do the backdoor Roth after that, I will not get taxed under the pro rata rule even if there were pre-tax funds in an IRA at some point in the year?

To put it another way, does the pro rata rule apply on the last day of the plan year or of the day of the conversion? The fact that there were pre-tax funds in the account on a date earlier in the year doesn't matter?

[seattlecyclone]

The answer can be found on Form 8606. Fill it out assuming you rolled all of your pre-tax funds into your 401(k) mid-year and see how much tax you owe on the conversion!