Have a client that was recently notified his company was going to allow in-plan Roth Conversions. He is maxing out his deferral into a pre-tax account and receiving an employer match. Probably wouldn't make tax sense for him at this point to convert existing pre-tax dollars, but want to consider non-deductible contributions.
Less his contributions and match, there is approximately 30,000 a year he could contribute in non-deductible contributions. If he were to efficiently convert those non-deductible dollars to the Roth account, he would be able to take advantage of tax-free distributions on both the contribution and growth.
My question is, as with IRAs and non-deductible IRAs, there are basis issues in regards to the pro-rata amount that can be converted of the pre-tax vs. non-deductible. Are there considerations similar to that in the 401k? If we do 30k in non-deductible contributions, can you elect to only convert the non-deductible contributions and avoid creating any additional taxable income on the conversion?