New Allocation Rules For Roth Account Rollovers

In proposed regulations and Notice 2014-54, the Treasury Department and the Internal Revenue Service have revised the manner in which the after-tax amounts credited to a Roth account under a 401(k), 403(b) or governmental 457(b) plan may be rolled over to a Roth account in another employer plan or to a Roth IRA. Under the special allocation rules previously in effect for after-tax amounts, a participant receiving a distribution that consisted of a pre-tax amount and a Roth account after-tax amount could be prevented from rolling over the pre-tax amount of the distribution to another employer plan or a traditional IRA and separately rolling over the after-tax amount to a Roth IRA. Subject to certain conditions, this distribution-splitting technique is now permissible.