Executive summary: In this updated September 2026 case study, "Ellen," age 64, moved $420,000 of pre‑tax IRAs into her active employer 401(k) via a trustee‑to‑trustee rollover, then executed annual backdoor Roths and a larger conversion in a low‑income year. The sequence removed pro‑rata complications, generated roughly $120,000–$150,000 of new Roth assets over three years, and preserved tax flexibility for Social Security and Medicare planning.

Background

Who: Ellen, a retired engineer who returned to part‑time consulting, age 64 in 2026. Her balance sheet in mid‑2026 included:

  • $420,000 in pre‑tax IRAs (rollover IRAs pooled from prior 401(k)s),
  • $310,000 remaining in an active employer 401(k) with the plan accepting roll‑ins,
  • $60,000 in a taxable brokerage account,
  • Plans to delay Social Security to age 70 to maximize monthly benefits.

Her objective: build Roth assets before required minimum distribution (RMD) age so she could manage taxable income, reduce future RMD complications, and retain withdrawal flexibility in her 70s.

Challenge

The obstacle was the IRS pro‑rata rule. Under current law (and Form 8606 reporting rules), any Roth conversion from IRAs is taxed pro‑rata across all pre‑tax and after‑tax IRA balances. With $420,000 of pre‑tax IRAs, small nondeductible IRA contributions converted via a backdoor Roth would be largely taxable — defeating the technique’s purpose. Ellen needed a way to segregate pre‑tax dollars out of IRAs so newly made after‑tax IRA contributions could convert with minimal tax.

Solution

Ellen’s adviser recommended a three‑part approach (implemented between ages 64–66):

  1. Confirm in writing that her active employer 401(k) accepts incoming rollovers of pre‑tax IRAs and the process/cutoffs for accepting roll‑ins.
  2. Execute a trustee‑to‑trustee direct rollover of the $420,000 pre‑tax IRAs into the employer 401(k), removing those pre‑tax dollars from IRA aggregation for conversion purposes.
  3. After the rollover completed, make annual nondeductible IRA contributions and immediately convert them (backdoor Roths), plus perform a larger Roth conversion during a calendar year of unusually low taxable income.

Why the rollover works (the mechanics)

Rolling pre‑tax IRA balances into an employer 401(k) takes those dollars out of the IRA bucket the IRS aggregates when calculating taxable portions of conversions on Form 8606. With pre‑tax IRA balances reduced to zero, new nondeductible IRA contributions represent basis that can be converted to Roth IRAs with little or no tax. The trustee‑to‑trustee direct rollover preserves tax status and avoids the 60‑day rollover trap and mandatory withholding mistakes inherent in indirect distributions.

Implementation: timing, mechanics and costs (Sept 2026 best practices)

Key practical steps Ellen used — updated for 2026 plan processes and recordkeeping:

  • Written confirmation: She obtained written confirmation from the 401(k) recordkeeper (printouts of plan rollover policy and an email from HR) that the plan accepted pre‑tax IRA roll‑ins and the timing required.
  • Trustee‑to‑trustee rollover: She initiated a direct transfer between custodians to avoid distribution withholding and the 60‑day window.
  • Sequence control: She waited until the rollover posted to the 401(k) account (usually 10–21 business days depending on custodians) before making nondeductible IRA contributions.
  • Immediate conversion: To reduce market‑timing and recordkeeping complexity, she converted new nondeductible contributions to a Roth IRA within a few days — a common practice in 2026 supported by most custodians' "same‑day" or short‑window processes.
  • Tax planning: She scheduled a one‑time larger conversion ($75,000 in the example) in a year she substantially reduced consulting income (taxable income lower than usual), which kept the conversion at an effective ~17% marginal tax cost.
  • Consider in‑plan Roth options: If a plan allows in‑plan Roth conversions, that provides an alternative—roll IRA money into the plan first, then optionally convert inside the plan. That can simplify recordkeeping but generates tax on conversion and depends on plan features.
  • Recordkeeping: She tracked Form 8606 filings for each nondeductible contribution and conversion to document basis and avoid future audit or double‑taxation risk.

Results (specific numbers and outcomes)

Illustrative, verifiable outcomes from Ellen’s three‑year sequence (rounded):

  • Year 1 (age 64): $420,000 direct rollover from IRA into employer 401(k). There was no immediate tax consequence because the transfer was trustee‑to‑trustee and involved pre‑tax dollars moving into a pre‑tax plan account.
  • Year 1–3: She executed annual backdoor conversions from newly contributed after‑tax IRA funds totaling roughly $45,000 across three years (reflecting annual contributions plus age‑based catch‑ups available to her). Those conversions carried negligible tax because pre‑tax IRA balances had been removed.
  • Year 2: One larger calendar‑year conversion of $75,000 in a low‑income year. She paid approximately $12,500 in federal tax on that conversion (roughly a 17% effective rate in her case after deductions and bracket calculations).
  • By age 66: Ellen had built roughly $120,000–$150,000 of Roth assets (combined annual backdoor amounts plus the one larger conversion) and kept $310,000+ of pre‑tax savings in her employer 401(k).

Practical benefits realized:

  • More tax‑flexible wealth: Roth assets grow tax‑free and qualified distributions are not included in ordinary income — useful for Social Security timing and Medicare IRMAA exposure.
  • Simpler RMD planning: Roth IRAs are not subject to RMDs (while Roth 401(k)s are unless rolled to a Roth IRA), so building Roth assets before RMD age (73 as of 2026) reduced future distribution math.
  • Withdrawal flexibility: With separate taxable, Roth, and pre‑tax buckets, Ellen could sequence withdrawals to manage tax brackets across ages 70–75.

Why this still matters in September 2026

Three contextual updates for readers in 2026:

  • RMD timing remains relevant: The RMD age is 73 under SECURE 2.0 through 2032, so cleaning IRA balances before that date preserves more flexibility.
  • Plan acceptance is more common but varies: Many large recordkeepers have streamlined roll‑in processes since 2023, but acceptance and timing windows still differ by employer plan. Written confirmation remains essential.
  • Legislative risk persists: Backdoor Roths and pro‑rata treatments have been discussed in policy debates in recent years; as of September 2026 no change eliminating these options has been enacted. Keep an eye on Congress and Treasury guidance if you are planning multi‑year strategies.

Lessons learned

  • Obtain written plan acceptance before moving funds — verbal promises aren’t enough.
  • Use trustee‑to‑trustee transfers to avoid withholding and 60‑day rollover risks.
  • Coordinate Roth conversion timing with low‑income years to minimize tax on larger conversions.
  • Document Form 8606 filings annually and keep custodian statements showing rollovers to the 401(k).
  • Consider in‑plan Roth conversion features, but compare tax costs, the plan’s Roth distribution rules, and whether you prefer Roth IRAs (no RMDs) to Roth 401(k)s.

Limitations and risks

  • If your employer plan does not accept pre‑tax IRA roll‑ins, this technique is not available to you.
  • Inherited IRAs, certain pension offsets, and accounts using Net Unrealized Appreciation (NUA) rules complicate rollovers — seek specialist advice.
  • Large single‑year conversions can push you into higher tax brackets or trigger Medicare IRMAA surcharges; staging conversions across low‑income years can mitigate this.
  • Regulatory or legislative changes could alter rules; monitor developments and do not assume permanence.

Checklist for readers considering the same path

  1. Inventory accounts: list pre‑tax IRAs, Roth IRAs, 401(k) plans, pensions, and taxable accounts.
  2. Get written confirmation from your 401(k) provider that the plan accepts pre‑tax IRA roll‑ins and note the custodian instructions and timeframes.
  3. Initiate a trustee‑to‑trustee direct rollover; do not take an indirect distribution unless unavoidable.
  4. After the rollover posts, make nondeductible IRA contributions and convert promptly to Roth; file Form 8606 each tax year.
  5. Model taxes for any planned larger conversions in low‑income years and project Medicare and Social Security interactions.
  6. Consult a CPA or retirement adviser who can model multi‑year tax outcomes and state tax consequences.

Takeaways

  • Moving pre‑tax IRAs into an employer 401(k) can clear the pro‑rata obstacle and enable clean backdoor Roths.
  • Execution matters: written plan acceptance, trustee‑to‑trustee transfers, timely Form 8606 reporting, and conversion timing reduce risk.
  • Roth assets bought before RMD age increase tax flexibility for Social Security claiming and Medicare premium management.
  • In‑plan Roth conversion options exist but require analysis of tax cost and distribution rules.
  • Monitor legislative and regulatory changes; as of Sept 2026 no elimination of these tactics has been enacted.

FAQs

Will moving my pre‑tax IRAs into a 401(k) always remove the pro‑rata rule?

Yes, provided the rollover is executed properly and the employer plan accepts pre‑tax IRA roll‑ins. The pro‑rata calculation applies to balances held in IRAs when you complete a conversion. If the pre‑tax dollars are moved into a 401(k) before you make nondeductible IRA contributions and conversions, those IRA conversions will not include the rolled‑in pre‑tax amounts.

What if my employer plan won’t accept roll‑ins?

If the plan refuses roll‑ins, the straightforward workaround used here is not available. Alternatives to evaluate: (1) staged Roth conversions paying the tax on pro‑rata shares, (2) in‑plan Roth conversions if you can roll pre‑tax IRAs into another employer plan in the future, or (3) using taxable account tax‑management strategies. Consult a tax adviser to model outcomes.

Do I need to worry about Medicare IRMAA when converting to Roth?

Yes. Roth conversions increase your adjusted gross income in the year of conversion and can temporarily raise Modified Adjusted Gross Income (MAGI), which affects Medicare Part B and D IRMAA surcharges. Plan conversions in lower‑income years or spread conversions across multiple years to limit IRMAA exposure.

Are state taxes a concern for Roth conversions?

Some states tax retirement distributions differently. If you convert and then move to a different state, state tax treatment can affect the effective cost of conversion. Always check state tax rules and consider state residency timing when planning large conversions.

Should I use in‑plan Roth conversion instead of rolling into my 401(k) and converting in an IRA?

It depends. In‑plan conversions keep money inside the employer plan and may simplify mechanics, but conversions are taxable and Roth 401(k) accounts remain subject to plan distribution rules and RMDs unless rolled to a Roth IRA. Compare tax timing, RMD treatment, and distribution flexibility before deciding.

If you’re considering this path, document plan policies in writing, run multi‑year tax models with a CPA or fee‑only adviser, and proceed with trustee‑to‑trustee transfers to avoid preventable mistakes. Ellen’s case is repeatable for many, but the details — plan acceptance, timing, and tax modeling — determine whether it’s the right move for you now.