NUA and Roth IRA

Submitted by abraham boznick on Mon, 2018-02-05 22:25

have an employer 401(k). I contribute 40k to my 401k. I allocate my contributions 50% to S&P 500 and 50% to the company stock.My employer also contributes to 401(k) by putting 4% of my salary into ESOP plan. Everything possible goes into ROTH (including employer match) and the overflow goesinto after tax contributions (after 18k because of HCE). If this is the case will I be able to get a benefit of NUA on retirement (because of ESOP and company stock)?



Submitted by Alan - IRA critic on Tue, 2018-02-06 03:19

  • Note that the employer match cannot be made to the Roth 401k account, it must go to the pre tax account. If you are an HCE and fail the ADP test, your elective deferral limit of 18k must be reduced and it sounds like the plan is recharacterizing those contributions as after tax employee contributions (non Roth).
  • If highly appreciated employer shares are assigned as company matching contributions in the pre tax account, these shares and the ESOP shares can be used for NUA. While the company shares in the Roth or after tax accounts are eligible for NUA, since these accounts are already tax free, there is no sense in creating cap gains taxes on the appreciation of company or ESOP shares in those accounts.

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