Starting 1/1/2008, a direct employer plan to Roth “conversion” is available. However, plan administrators will probably not be immediately familiar with this, so you may need to wait a couple months till they get their act together. The 100,000 modified AGI limit applies to this just as to a regular conversion until 2010, so you will need to be income eligible.

Only pre 1987 after tax contributions can be distributed separately, not subject to pro rating with pre tax amounts. A potential hurdle here is that the pre tax amounts may have to be transferred at the same time, either to a Roth or a TIRA. Finally, since no Regs have been developed on this yet, it is unclear if a direct rollover is required or if the employee can do a rollover rather than a direct rollover.

If the client already has a TIRA of any size, then the above option will allow the after tax contributions to escape pro rating with a large IRA balance as would be necessary with an ordinary conversion. However, if the entire plan is to go to a Roth and there is no existing TIRA, then there is no real downside from doing this the conventional way with a rollover to the TIRA followed by a Roth conversion.

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