Client has 95K - 25 after tax dollars and the balance earnings. Client has terminated. Wants to take the after-tax amount and roll the pre-tax earnings to new employer, as new plan doesn't accept after tax dollars. Expert is stating part of the earnings must be distributed and taxed if the after tax dollars are being distributed - approximately 31%. I am unable to find the site that confirms this. Please, if you know, share. PS it isn't in the instructions book....Thank you!

Is this truly a partial distribution -- or a total distriabution that is only partially rolled over? I think the reg you're looking for is taking about someone taking a partial distribution.

This is a partial distribution. The plan terminated, the client wants to take only his after tax money out and transfer the balance to the new employer plan

Expert would be correct EXCEPT Code Section 402©(2) states that a rollover comes first from the taxable portion and then from the nontaxable portion. So... the earnings can be rolled over in full.

I believe you've described a total distribution, unless the transfer is something that's going to happen without the participant's consent, as in a merger.

No matter, you can generally take out pre-87 after-tax contributions on a FIFO basis. IRS Pub 575 might help; here's the link (scroll down for Pubs).

EP Forms/Publications/Products

See page 16.

I agree with Bird.
You want to drop the ‘partial’, as it may only confuse those involved.

The participant can submit a withdrawal request for the total balance, and include instructions to :
a) Send the pre-tax amount to the new employer-plan
b) Send him a check for the after-tax amount.

This will provide the desired results.

The money is post 86 rather than pre. Does this make a difference?

No.

Remember, you originally posted on the theory that you were dealing with an instruction to distribute only partially. In fact, as has been pointed out, this is a complete distribution from the plan. You are only using the word "partial" to refer to the fact that some of the distribution is going one place and the balance is going another.

In such a case, the Code is clear. Roll all the taxable.

However, had you been speaking about a true "partial" distribution from a plan, then you would look to 87-13 or 87-16 (I always get them confused until I look them up... be my guest) to see what the rules should be with respect to withdrawing *some* of one's account. What I think it said, is that a plan had to decide whether to follow current law (a partial distribution is made on a pro-rata basis between tax and after-tax) or whether it could follow pre-existing law (all from the non-taxable pot until it is empty). Once the *plan* decided, then *all* subsequent distributions had to be treated the same. But, to reiterate, this is all gibberish to you, because you aren't asking for a partial distribution at all.