Rollover of employer match on roth 401k
Hi,
Concerning a Roth 401k—–When the custodian gives you 2 separate checks, one for your after tax contribution and the other for your employers match, I will deposit the employee contribution into a Roth IRA. But does the employer match get rolled into a traditional IRA? Or can you just deposit both checks into the Roth IRA and reduce the basis in the Roth IRA by the amount of the employer match??
Permalink Submitted by Alan - IRA critic on Wed, 2021-02-03 18:31
The employer contributes the matching contributions to the traditional account in the 401(k), not to the Roth account and they constitute pre-tax money in the traditional 401(k) account. Rolling this money over to a Roth IRA is a taxable rollover that adds to the individual’s basis in taxable Roth conversions. This rollover is not permitted to be treated as reducing Roth IRA contribution basis such that the rollover would be nontaxable.
If these checks are payable to the destination accounts as direct rollovers rather than payable to you, the rollovers must be made to the type of account that corresponds to the distribution request that was made, otherwise the reporting on Forms 1099-R by the 401(k) administrator will not reflect the correct taxability of these rollovers.
If the distributions were made payable to you, rollover of the money from the Roth 401(k) can only be to the Roth IRA. Rollover of the money from the traditional account in the 401(k) can be rolled over to either the traditional IRA or the Roth IRA, but will be taxable if rolled over to the Roth IRA as I previously mentioned.