I had a prospect tell me that his 401(k) match goes into a Roth or after-tax bucket. So the company’s contribution is after-tax. I have never heard of this happening in any other 401(k). Is this allowed, or is my prospect mistaken?
Matching contributions are employer contributions. Employers are not permitted to make nondeductible contributions to retirement plans. Any employer contribution that exceeds the amount deducible on the employer’s tax return is an excess contribution subject to penalty and can possibly disqualify the plan. Because they must be deductible contributions, they cannot be made to a Roth account. They are deferred income to the employee on which the employee must pay tax when distributed.
Permalink Submitted by Alan - IRA critic on Wed, 2021-04-14 14:32
Prospect is likely mistaken. Can he produce a plan statement for you to look at?