My wife’s W2 job now allows after-tax 401k contributions & in-service withdrawals. Once she receives a distribution check, what are the steps to make the rollover to the Roth solo 401k? She already has a Roth solo 401k brokerage account under the self-directed solo 401k established with Schwab (but no voluntary after-tax account). Are there any legal limits on the number of times she can rollover each year?
Since the day-time employer allows for both voluntary after-tax contributions and in-service distributions (note that bot of these items are required in order to process the mega back door conversion to a Roth IRA or to a Roth 401k including a Roth solo 401k), the next step is to contact the administrator of the existing full-time employer 401k and request a full “direct rollover” of the voluntary after-tax amounts in the 401k to the Roth Solo 401k or Roth IRA .
How to Move Voluntary After-Tax 401k Funds in an Existing Full-Time W-2 Job Employer 401k to a Roth Solo 401k or to a Roth IRA
First: confirm the day-time job employer allows for both voluntary after-tax 401k contributions as well as in-service distributions.
Second: determine if you want to convert the voluntary after-tax 401k funds to a Roth IRA or, if you are self-employed, to a Roth solo 401k.
Third: contact the administrator of the 401k day-time employer to determine what forms they need to process the outgoing “direct rollover” of the voluntary after-tax 401k funds to a Roth IRA or to another Roth 401k (i.e., Roth solo 401k). Note: Since many full-time employers have not heard of a Roth solo 401k, it is easier to say Roth 401k as a Roth solo 401k is essentially a Roth 401k but for the self-employed with no full-time W-2 employees.
Fourth: since the IRS rules require both the basis and gains (if any) in the voluntary after-tax 401k have to be directly rolled over (i.e., you can’t just choose to move the voluntary after-tax basis), you will be able to split up the direct rollover by transferring the basis to the Roth IRA or to the Roth solo 401k, and the earnings can be directly rolled over to a pretax solo 401k or pretax Traditional IRA.