After-Tax 401(k) Rollover: Move Your After-Tax Contributions to a Roth IRA Tax-Free

If you made after-tax (non-Roth) contributions to your 401(k), you can do what's known as a split rollover: send the after-tax basis directly to a Roth IRA — zero tax — and roll the pre-tax money to a traditional IRA separately. Most people leaving a job don't know this is possible. Many roll everything into a traditional IRA and permanently lose the tax-free growth they were entitled to. IRS Notice 2014-54 made the mechanics clear in 2014. Here's how it works, what it's worth, and how to execute it.

Two types of 401(k) contributions that look similar but aren't

Most 401(k) plans allow three kinds of contributions. Understanding which you have is the foundation of this strategy:

After-tax non-Roth contributions are the ones this guide is about. They're distinct from Roth 401(k) contributions — the plan tracks them separately as your "basis" in the plan. The opportunity is that this basis, when rolled directly to a Roth IRA, triggers no new tax. The earnings on those after-tax contributions still go to a traditional IRA (they were always pre-tax equivalent).

How IRS Notice 2014-54 makes the split rollover possible

Before 2014, there was ambiguity about whether you could separate after-tax from pre-tax amounts when rolling over from a qualified plan. Some people tried, some plan administrators resisted, the IRS occasionally objected. Notice 2014-54 ended the debate.¹

The key rule: when a qualified plan distribution is divided into separate rollovers going to two or more destinations at the same time, you can designate which portion of the pre-tax amount goes where. In practice, this means you instruct the plan administrator to send:

• Your after-tax basis → directly to your Roth IRA (zero federal tax owed)
• Everything else (pre-tax contributions + all earnings, including earnings on after-tax contributions) → to your traditional IRA (deferred, taxed at withdrawal as ordinary income)

The Notice applies to distributions from qualified plans: 401(k), 403(b), and governmental 457(b). It does not apply to IRA-to-IRA rollovers — the pro-rata rules there are different and less favorable.

Real-dollar example: $750,000 401(k) with $95,000 after-tax basis

Elena, 58, is leaving her employer after 22 years. Her 401(k) balance is $750,000. The plan's records show $95,000 in after-tax (non-Roth) contributions she made over the years — this is her after-tax basis.

If she rolls everything to a single traditional IRA (the default):

• $750,000 lands in a traditional IRA
• She has $95,000 of IRA basis, which she tracks on Form 8606
• At withdrawal, $95,000 / $750,000 = 12.7% of each withdrawal comes out tax-free (pro-rata)
• All $750,000 grows tax-deferred — earnings on the after-tax portion are ultimately taxable
• Roth conversion later is possible but will require paying tax on the pre-tax portion too (and may be complicated by other IRA balances via the pro-rata rule)

If she uses the split rollover under Notice 2014-54:

• $95,000 → Roth IRA, zero federal tax owed (it's already after-tax basis)
• $655,000 → traditional IRA (pre-tax contributions + all earnings)
• The $95,000 in her Roth IRA grows completely tax-free, no RMDs ever
• No Form 8606 complexity to track; the traditional IRA has zero basis (clean)
• If she waits 7 more years at 7% growth: $95,000 grows to ~$152,500 in her Roth — all tax-free

The earnings-on-after-tax-basis — roughly $57,500 in this example — would be taxable in a traditional IRA but are permanently tax-free in the Roth. At a 22% marginal rate, that's ~$12,650 in tax savings on just those earnings.

Split rollover calculator: what's your tax-free Roth transfer worth?

Enter your after-tax 401(k) basis and total balance. The calculator shows how much goes to your Roth IRA tax-free and estimates the future tax savings compared to rolling everything into a traditional IRA.

Who has after-tax 401(k) contributions?

After-tax non-Roth contributions are most common in these situations:

• High earners who maxed out pre-tax/Roth and continued contributing. In 2026, the total defined contribution limit under IRC § 415(c) is $72,000 (or $80,000 with the 50+ catch-up; $83,250 with the 60–63 super-catch-up).² After maxing the $24,500 elective deferral and receiving employer matching contributions, some plans allow additional after-tax contributions to reach the $72,000 ceiling. If your employer contributes $20,000, you've already "used" $44,500 of the limit — leaving $27,500 of potential after-tax contribution room.
• Employees at large companies with robust 401(k) plans. Mega-cap employers (big tech, finance, healthcare) are more likely to offer after-tax contribution features and in-plan Roth conversion. If you worked at one of these companies for many years, check your plan documents or call the plan administrator.
• Long-tenured employees. Plans that allowed after-tax contributions in earlier decades (before Roth 401(k)s were widely available, post-2006) may have substantial accumulated basis for employees who contributed consistently.
• Employees who rolled over from a prior 401(k) that had after-tax contributions. Some plans accepted after-tax rollovers from other plans; that basis travels with you.

How to find out: Log into your 401(k) plan portal and look for "after-tax contribution balance," "after-tax basis," or "non-Roth after-tax." Alternatively, request the plan's most recent annual statement or call the plan administrator and ask: "Does my account contain any non-Roth after-tax contributions, and what is the current basis?"

Executing the split rollover: step-by-step

1. Confirm the basis. Get written confirmation of your after-tax (non-Roth) contribution basis from the plan administrator. You need the dollar amount, not just that it exists.
2. Open a Roth IRA if you don't have one. You need the account established before the rollover is processed. This is a Roth IRA, not a Roth 401(k) — you can open one at any brokerage regardless of income. A Roth rollover (from a qualified plan) is never limited by income phaseouts.
3. Contact the plan administrator before initiating anything. Tell them: "I want to do a split direct rollover of my after-tax basis to my Roth IRA and the remainder to my traditional IRA." Get their required form or instructions. This step is critical — instruct them before the distribution is processed.
4. Provide rollover destination details for both accounts: your traditional IRA custodian (FBO your name, account number) and your Roth IRA custodian (FBO your name, account number). Most large plan providers accept split direct rollover instructions.
5. Verify the 1099-R reporting. At tax time, you should receive a Form 1099-R. Box 5 should show the after-tax employee contributions (your basis). Box 7 distribution code should be "G" (direct rollover). File Form 8606 if any taxable amount is reported. The after-tax portion going to the Roth IRA should be zero taxable income.
6. Do not commingle with a 60-day rollover. This split must be done as a direct (trustee-to-trustee) rollover. If you receive the check and try to deposit it into two accounts yourself, you lose the ability to designate the split cleanly and may trigger the 20% mandatory withholding on the pre-tax portion.

Four common mistakes that destroy the benefit

1. Rolling everything to a single traditional IRA. This is the default if you don't actively specify a split. The after-tax basis isn't lost — you'll track it on Form 8606 — but the tax-free growth opportunity in Roth is gone. You can't undo this later by "converting" that basis to Roth without paying tax on the pro-rata earnings across all your traditional IRAs.
2. Rolling the after-tax amount to an existing traditional IRA first, then trying to convert. Some people try: "I'll roll everything to traditional IRA, then immediately convert the after-tax portion to Roth." This sounds equivalent but isn't. Once the after-tax basis lands in a traditional IRA, any subsequent Roth conversion is subject to the pro-rata rule across all your traditional IRAs. If you have a large pre-tax balance, you'll owe tax on much of the conversion.
3. Confusing after-tax non-Roth with Roth 401(k). Roth 401(k) contributions roll directly to a Roth IRA under different rules (IRC § 402A) and are already well-known. The split rollover strategy applies to the less visible after-tax non-Roth bucket, which many plan participants don't even know they have.
4. Waiting until after departure to figure this out. The split rollover requires the plan administrator to process two simultaneous direct rollovers. Some plans have limited flexibility for former employees. Call before your last day — while you still have leverage as an active participant — to understand your plan's procedure.

Pro-rata rule interaction within the distribution

The pro-rata rule under Notice 2014-54 operates within a partial distribution, not across your entire account. If your 401(k) has $750,000 total ($95,000 after-tax basis) and you only roll over $100,000, the IRS looks at the plan's ratio: $95,000 / $750,000 = 12.7% is after-tax. So $12,700 of your $100,000 distribution is after-tax, not all $95,000.

To move all $95,000 of after-tax basis to a Roth IRA tax-free, you typically need to roll over your entire account balance at once — separating the $95,000 after-tax to Roth IRA and $655,000 pre-tax to traditional IRA simultaneously. This is another reason this strategy works best at a job transition, when you're rolling the full balance.

Sources

1. IRS: Rollovers of After-Tax Contributions in Retirement Plans — official IRS summary of Notice 2014-54, confirming after-tax amounts can be rolled to a Roth IRA without including earnings.
2. IRS: 401(k) limit increases to $24,500 for 2026, IRA limit increases to $7,500 — 2026 elective deferral limit $24,500; IRC § 415(c) total contribution limit $72,000 ($80,000 with catch-up; $83,250 for ages 60–63).
3. IRS Notice 2014-54 (full text) — original guidance on allocation of after-tax amounts to rollovers from defined contribution plans; governs split-rollover mechanics including pro-rata rule within partial distributions.
4. Kitces: IRS Notice 2014-54 Authorizes Tax-Free Roth Conversions of After-Tax Plan Funds — practitioner analysis of how Notice 2014-54 changed the rules and common implementation issues.

Tax values verified as of April 2026 using IRS Notice 2025-67 and IRS.gov. Contribution limits are for 2026 plan year.