In general, you are allowed to move funds from one retirement account to another similarly titled retirement account without the transfer counting as a distribution. This process is referred to generically as an IRA Rollover. There are many reasons you could be doing an IRA Rollover, and there are different tax consequences or no tax consequences depending on the type of rollover you are performing.

The most common IRA Rollover is moving funds from an employer-sponsored retirement account, such as a 401(k), into a traditional IRA at a custodian of your choice. Most employer-sponsored retirement accounts only allow this transfer to happen “out of service,” meaning after your termination or retirement date with the firm, but this varies by employer and by component of the retirement plan.

While the easiest way to do a Roth conversion from your 401(k) funds is often to do an IRA Rollover from your 401(k) directly into your Roth IRA, for the plan components which are not eligible for in-service Rollover, they may be eligible for in-plan Roth conversion.

An in-plan Roth conversion is when you are moving funds from a traditional component into a Roth component all within your 401(k) plan. As the money movement requires extra effort from the record keeper, this type of conversion typically has a small fee associated with it.

We currently use a company called RiversEdge as our third party administrator to run many of the day-to-day aspects of the plan. To do an in-plan Roth conversion of your Employee Deferrals or Safe Harbor Employer Match components, you must use the “RiversEdge In-Plan Roth Conversion Form.” As not all employers allow for in-service Roth conversions, the easiest way to acquire the form is to ask RiversEdge or your HR department for a copy.

The form is amazingly straightforward.

Once the paperwork has been processed though, it can be difficult to find out how much was converted. Here is how you do it:

After logging on to RiversEdge’s plan participant site, click on the “View” tab of the top bar and then click on the “Statements & Fee Disclosures” page. Then, on the page that loads, choose the “Statement on Demand” feature. The page that loads should look like this:

In the “From Date” and “To Date” boxes, pick a time period that contains the month and day you did your Roth conversion. Once you have made those selections, click “Generate.”

Scroll down to view the results. You will see a list of all your funded sources. Each one except TOTALS will start with its details hidden and a small arrow to the left which when clicked opens the details.

Locate the line which says “Source: IN-PLAN ROTH ROLLOVER ACCOUNT” and click to open it.

In the “Fund Transfers” column and under the “Source: IN-PLAN ROTH ROLLOVER ACCOUNT :: TOTALS” row, the dollar amount listed is the amount that you converted to Roth during the selected time period.

When doing your future tax planning for the year, you can note this amount as having already been converted to Roth and expect it as taxable income for your next tax return.

Tax planning is very different than tax return preparation. The goal of tax preparation is to minimize your tax owed this year. The goal of tax planning is to maximize your after-tax net worth by minimizing your taxes owed over your lifetime. Roth conversions are smart tax planning but do result in more tax owed this year.

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