Confused Custodians
Many custodians are reluctant to do conversions of employer plan assets, said Beverly DeVeny, an IRA technical consultant at Ed Slott and Company.
"They want the assets in an IRA first and then will do a Roth conversion," she said.
For the record, plan participants can do a Roth conversion from their employer's plan.
The other problem that's occurring out in the real world with custodians, according to DeVeny, has to do with the conversion of after-tax amounts.
"The IRS has yet to release any meaningful clarification on this topic and many plan administrators have not changed the advice that they have been giving plan participants for the last three or four years," she said.
Many More Taxing Issues
IRA owners seem to be focusing entirely on one slice of the tax pie with Roth IRA conversions, instead of the entire tax pie. That's a mistake, said Robert Keebler, a certified public accountant, partner at Baker Tilly Virchow Krause LLP, and author of "The Rebirth of Roth: A CPA's Ultimate Guide for Client Care."
IRA owners need to examine what he calls the incremental effective income tax rates, the alternative minimum tax, the new 3.8% Medicare surtax, and the estate tax and post-mortem distribution issues.
"Perhaps the most misunderstood factor impacting the decision of whether or not to convert is the appropriate income tax rates to use for the conversion year versus the future tax years," Keebler wrote in a white paper.