in year of 1st Roth 401(k)contribution. If participant
joins another employer's plan, clock continues based on original
contribution date if, and only if, original Roth account
is rolled over into new employer plan.
First year of
5-year period determined by the date of any contribution to
any Roth IRA. If a participant rolls over a Roth 401(k) to
a Roth IRA, the original year of Roth 401(k) contribution
is not considered for the 5-year qualification clock unless:
rollover is qualified; or
is rolled over into a previously established
Roth IRA (or into a new Roth IRA and a Roth IRA previously
Taxation of Nonqualified Distribution
Partial distribution taxed based on proportionate distribution
of contribution principal and
considering Roth 401(k) account only to determine the
percent of distribution treated as taxable interest.
Taxable based on first money in, first money out,
meaning that tax-free contribution principal is distributed
first, then taxable interest. If Roth 401(k) account rolled
over to Roth IRA, then Roth IRA rules apply to rollover.