New In-plan Solo 401k Roth Conversion Rules Effective Year 2013

Signed into law on January 2, 20013 by president Obama, the American Taxpayer Relief Act of 2012

now allows the following Solo 401k amounts to be converted to Roth Solo 401k:

Sec. 902 of the new bill permits in-plan Roth Solo 401k conversions from (i)employer profits sharing contributions and (ii) employee contributions (salary deferral amounts).  This new law is effective for tax year 2013 and forward. Therefore, if any of these types of funds were converted to a Roth Solo 401k in 2012, corrections may be warranted to avoid penalties.

Under the previous law,  employee contributions could only be converted after the participant turned 59 1/2.  And employer contributions were subject to a 2 year waiting period and attainment of age 59 1/2 before they could be converted to a Roth Solo 401k.