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Discussion:Roth Rollover to Employer Plan

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Discussion Forum Index --> Tax Questions --> Roth Rollover to Employer Plan


DanC (talk|edits) said:

19 March 2007
I have a client that withdrew the funds from his Roth IRA and used the funds to purchase "time" with his employer. He works for a Texas State Agency. Under the retirement plan if you have had time worked with another qualifying agency, i.e. armed services, then you can purchase that time in the current plan. My question is the Roth distribution treated as a rollover or is the qualifing amount taxed and he now has a basis in the employer plan? The broker seems to think this is a recharacterization, but I don't think so.

Thanks for any help. DanC

Riley2 (talk|edits) said:

19 March 2007
Nontaxable trustee-to-trustee transfers may be made from 403(b) and 457 plans to purchase permissive service credits from governmental defined benefit plans. However, no such provision exists for Roth accounts.

Technically, this is not a rollover; consequently, the transfer is treated as a distribution from the Roth account, followed by a nondeductible purchase of permissive service credits. Yes, I believe that the client will have basis in the account.

Deback (talk|edits) said:

March 19, 2007
Agree with Riley. The distribution from the Roth IRA should be treated as a distribution from a Roth IRA and not as a rollover. Doesn't matter what the funds were used for. Be sure to enter the prior Roth contributions in the 12/31/05 Roth basis worksheet.

DanC (talk|edits) said:

19 March 2007
Thanks. I was not able to find where a Roth could be used to purchase service credits or rolled over without it being taxable.

Thanks

Riley2 (talk|edits) said:

19 March 2007
DanC, not sure why Congress never saw fit to allow taxpayers to use funds from 401, 408, or 408A plans to purchase permissive service credits.
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