A Roth conversion is taking existing pre-tax assets in your retirement account and changing the tax status of them by rolling them into a Roth source. This is a taxable event, applicable in the tax year that you process the conversion. Sometimes classified as an internal rollover, the converted assets remain in your retirement account. They are simply renamed or reclassified as a Roth source and therefore change the taxable parameters when taking a distribution in the future.
Each Plan designates their own provisions on the conversion requirements. Some may impose an age limit or only permit particular sources of assets to be eligible for a Roth conversion. Review your Plan’s provisions, speak to your Plan Sponsor or contact BPAS Participant Services for additional information.
Contact BPAS Participant Services at 1-866-401-5272 and let the representative know that you would like to do a Roth conversion. If your plan permits conversions, you will receive an In-Service Withdrawal Election Form for completion. The form includes important tax notification information regarding the conversion. Be sure to carefully review all information and consult with your tax professional regarding any additional questions.
Yes. The amount of your Roth conversion is taxable as ordinary income, in the tax year that you process the conversion. When you directly roll over a distribution to a designated Roth account using an in-plan Roth direct rollover, the 10% penalty will not apply to the taxable portion of the distribution. However, if a taxable amount you rolled over in an in-plan Roth rollover is distributed within five years, the 10% penalty will apply to the distribution as if the distribution were includible in gross income.
Taxes are not automatically withheld when you complete a Roth conversion. If you are under the age of 59 ½ and your Plan permits Roth conversions, please note that the taxes cannot be paid with plan assets. If you are over the age of 59 ½, you have the opportunity to withhold for federal income tax purposes. We encourage you to the review your situation with your tax adviser.
Once completed, return the form to BPAS via fax or mail. To avoid any potential duplicate requests, please submit your form in one manner only. Fax: 315-292-6450 Mail: BPAS 6 Rhoads Drive #7 Utica, NY 13502
Converted assets are taxed in the year that they are converted. Later distributions from the designated Roth account that are qualified distributions will not be taxed (including earnings after the rollover). A qualified distribution from a designated Roth account is a payment made both after you attain age 59 ½ (or after your death or disability) and after you have had a designated Roth account in the Plan for a period of at least 5 years. The 5-year period described in the preceding sentence begins on January 1 of the year your first contribution was made to a designated Roth account. Payments from the designated Roth account that are not qualified distributions will be taxed to the extent allocable to earnings after the rollover/conversion, including the 10% additional tax on early distributions (unless and exception applies).
No. The request for a Roth conversion is irrevocable. You cannot later “unwind” the in-plan Roth rollover and the recharacterization rule that applies to IRA contributions does not apply to this In-Plan Roth Rollover. Be sure to review your circumstances with your tax professional prior to completing a conversion.
If you have questions about the Roth conversion feature, the conversion process or to track your conversion, please contact BPAS Participant Services at 1-866-401-5272. As a Roth conversion is a taxable event, we cannot stress this enough: Be sure to consult your tax adviser with respect to the proper method of reporting and the advisability of making a Roth conversion.