A. Depending on the type of 401(k) you have, you may have some money that has never been taxed (pre-tax) and some money that has already been taxed (after-tax). Until recently, the IRS was vague on the ability to complete this type of rollover.
Effective January 1, 2015 and retroactive to September 18, 2014, IRS Guidance Notice #2014-54 provides clear guidance on the ability to complete the rollover of after-tax money to a tax-free tax shelter. Specifically, pre-tax balances can be rolled over to a Traditional IRA or Rollover IRA, while the after-tax balance can be rolled over to a Roth IRA. The after-tax balance should not be confused with Roth 401(k) contributions.
We will discuss all of the three contribution types in next several blog posts.