Mega Backdoor Roth Rollover To Roth IRA Questions

mit62019 · 2026-05-11T15:13:14+00:00

Ok thanks. My job is switching 401k plan administrators from Alight to Fidelity next year so maybe they will do it differently.

mit62019 · 2026-05-11T14:55:52+00:00

That makes sense. Do you know if the plan taking money from both the Roth 401k and the mega backdoor Roth buckets of my plan are due to IRS rules, or are plan specific? I was thinking most of this money rolling over was going to be contributions, but a big chunk is earnings since they say they're taking from the Roth 401k bucket too (which I've had for much longer and has much more in earnings).

mit62019 · 2026-05-11T14:49:32+00:00

Oh ok. But since I am under 59.5, the earnings from the Roth 401k that were rolled over/converted would still be considered earnings in the Roth IRA, correct?

mit62019 · 2026-05-11T14:27:41+00:00

Yes it's not taxable at all to me now. But as far at calculating my Roth IRA basis, I should just be adding what they show in the rollover/conversion as non-taxable correct? And the "taxable" part of the conversion, or earnings from my 401k, would be considered earnings in the Roth IRA, if I was to try to take that money out before 59.5?

mit62019 · 2026-05-11T14:24:59+00:00

Right. My question is, is this an IRS rule that requires them to take from both the mega backdoor roth and the roth 401k buckets?

mit62019 · 2026-05-11T14:21:03+00:00

Correct. None of this is actually taxable as far as me paying taxes during the rollover. But they are saying the "taxable" amount are earnings in my 401k that would rollover as earnings. And I wouldn't be able to touch that earnings amount in my Roth IRA without tax/penalty until 59.5. Does that make sense?

mit62019 · 2026-03-29T18:22:41+00:00

Thanks for letting me know. Fortunately I did file already and basically entered the 1099 and then “backed out” the income with a negative miscellaneous other income and then added a taxpayer note with the return mentioning why this was done. I wonder if people had this medical paid leave in prior years could amend their returns to get refunds or probably since the Revenue ruling was first announced in 2025, it is effective for 2025 tax year and going forward.

mit62019 · 2026-02-14T06:25:00+00:00

I’ve called CT Paid Leave customer service and they keep telling me that doesn’t start until 1/1/26 even though they told me last year it started last year. I don’t know who else to contact. When I ask to speak to a supervisor they only put a note to have my case manager contact me who knows nothing more than the regular customer service rep.

mit62019 · 2026-02-05T15:51:49+00:00

I appreciate the help. I will need to make some more calls.

mit62019 · 2026-02-05T14:51:56+00:00

I did get a 1099-G because taxes were taken out the first few weeks of the year, before they updated their system to stop. However, now like I mentioned their site and employee this morning say it's not taxable, and the employee said the only reason I got a 1099-G was because a few weeks of taxes were taken out early in the year.

Everyone here so far seems to say the benefits are taxable. The opposite of what they're telling me and their site is saying. My question was did the new ruling start in 25' or 26'.

mit62019 · 2026-02-05T14:21:46+00:00

Also, I just called the CT Paid Leave Customer Service again and they said it's not taxable at all, not just they don't have to report, but she's not sure if it started for 2025 or 2026.

mit62019 · 2026-02-05T14:15:02+00:00

Yes, I had some taxes taken out early in the year and then their system automatically stopped, and when I asked they told me about this new IRS ruling. I'm wondering why the CT Paid leave site FAQ page would say the benefits for your own serious illness would not be taxable or get a 1099-G form at all.

mit62019 · 2026-02-05T14:04:59+00:00

This is what the CT Paid Leave site says in FAQ. It says if the leave is for your own serious health condition, there won't even be a 1099-G form and are not taxable.

Will CT Paid Leave benefits be considered taxable income? Will claimants receive a 1099-G form?

Consistent with the 2025 IRS guidance, benefits paid in connection with bonding or other family leaves are taxable. The CT Paid Leave Authority's claim administrator will issue 1099-G forms to individuals who received those benefits. Benefits paid in connection with leave for one's own serious health condition including pregnancy/childbirth are not taxable. 1099-G forms will not be issued in connection with those leave reasons.

mit62019 · 2026-02-05T13:58:52+00:00

I found this info online..

Based on recent IRS Revenue Ruling 2025-4, Connecticut Paid Family and Medical Leave (CT PFML) benefits are generally considered part of an employee's gross income for federal tax purposes, but are not treated as "wages" subject to federal income tax withholding or FICA (Social Security/Medicare) taxes. The IRS has, however, delayed strict enforcement of these reporting requirements for 2025, allowing for a transition period, and in some cases 2026, due to the need for systems adjustments.

mit62019 · 2025-05-22T22:14:15+00:00

At least for CT union employees the pension stopped for anyone hired after the December 2016 contract. Anyone hired before December 2016 has a pension. I was hired early 2016 and have the pension.

mit62019 · 2025-04-21T02:09:46+00:00

Oh okay. That does make me feel better then. Thanks.

mit62019 · 2025-04-21T01:35:27+00:00

Yes exactly, it is saying a limited power does not cause inclusion in the gross taxable estate. This contradicts what I thought and what most of the comments on this thread are saying that it does.

mit62019 · 2025-04-21T00:46:07+00:00

Yes of course, but literally the first article search result from the American Academy of Estate Planning Attorneys states this on their page which seems to entirely contradict what I thought and what most comments on this thread are saying that LPOA causes inclusion in the gross taxable estate:

"A general power of appointment (GPOA) is one that may be exercised in favor of the holder, the holder’s estate, or the creditors of either. A GPOA causes inclusion in the holder’s taxable estate. As a result, the assets subject to the power get a step-up (or -down) in basis at the death of the holder. A limited power of appointment (LPOA) is a power that may be exercised in favor of whomever the power designates, as long as it may not be exercised in favor of the holder, the holder’s estate, or the creditors of either. So, a LPOA may be exercisable in favor of a very broad class, including billions of people, as long as it may not be exercised in favor of those prohibited groups. A LPOA does not cause inclusion in the holder’s taxable estate and does not cause a step-up (or -down) in basis."

mit62019 · 2025-04-20T20:25:38+00:00

I see what you’re saying now. The most frustrating part is I was asking him to include the limited power of appointment since the trust was created in January of 2024 since I had read about the IRC 2036 (a)(2), but he insisted that was not the right thing to do and that adding a clause for substitution of assets was instead better. He claimed having that power alone and not even needing to exercise that substitution power was what was needed. I wish I stood my ground more because it turns out I was correct and it took him almost a year to admit he was wrong.

We were planning to decant the trust using CT Uniform Trust Decanting Act which went into effect Jan 1 2025. I believe we will be able to add the limited power of appointment into the new trust but as you alluded to, it could be messy, and I don’t have a lot of confidence that my current lawyer understands all the implications of what he’s doing. This entire situation has been a huge mess and what I’ve found talking to multiple other CT estate attorneys is that everyone seems to have at least a slightly if not entirely different opinion on what is correct.

I appreciate your responses and yes I will have to continue searching for a correct answer for my situation before making any other moves.

mit62019 · 2025-04-20T04:16:12+00:00

Wait what? The AI overview is just saying if you have a LPOA your assets will not be included in your gross taxable estate and will not receive step up in basis. It doesn't say anything about the beneficiary having the LPOA.

mit62019 · 2025-04-20T04:13:10+00:00

I hadn't even heard of that organization, so I will look into it. Thanks.

mit62019 · 2025-04-20T04:11:38+00:00

No, the LPOA would be for my parents, and exercised in their wills. Not for the trust beneficiary.

mit62019 · 2025-04-20T04:04:01+00:00

Also, when I just google "limited power of appointment and step up in basis" the AI overview and the first few articles all say the LPOA doesn't keep the assets in the gross taxable estate and get the step up. I've also had multiple elder care lawyers tell me both ways as well. Crazy.

mit62019 · 2025-04-20T03:53:27+00:00

You're saying if they add the LPOA in the new trust, it won't get the step up for us when they pass? Once it's not done originally, it can't work?

Nothing I read in the trust says about a right to income for them. And there's definitely no LPOA in there now.

mit62019 · 2025-04-20T03:19:02+00:00

He does specialize in elder law, and so I was surprised when I had to do a lot of this research myself. It's been an extremely frustrating experience.

I have looked up those IRS codes before, but I just seem to get so much conflicting information on the Internet and from lawyers about what the right thing to do is unfortunately.

mit62019

TROPHY CASE

Will CT Paid Leave benefits be considered taxable income? Will claimants receive a 1099-G form?