If an employee makes Roth contributions into a 401(k) and that 401(k) also has an employer safe harbor match, can the employer match be rolled over into a Roth or will there be a tax consequence to the employee?
Yes, but the employer match will be taxed. If current taxes are to be avoided a split rollover is needed. All funds in the Roth portion go to a Roth IRA in a direct rollover, and the match which is in the pre tax portion of the plan is rolled to a traditional IRA. If employee is in a low enough bracket to make the taxes realistic, the entire plan balance could be rolled into the Roth IRA. There would be a separate 1099R for the pre tax match direct rollover.
Hi, I wanna know the process of hoe this could be done. I have an existing 401k and my employer has 401k safe harbor match. The employer stopped 401k and I have to move my asset to a Roth IRA. How do I do this? What are the tax implications? Is there a 10% penalty aside from tax?
Did the employer terminate the plan, or did they just stop matching contributions? Are you still working there, and if so what is your age? Note: A rollover to a Roth IRA does not incur a penalty but will be taxable except to the extent you made after tax contributions.
Permalink Submitted by Alan - IRA critic on Thu, 2019-06-20 21:41
Safe harbor non elective or matching contributions cannot be distributed from the plan while still employed until age 59.5 (or disability) at the earliest. Doing so would cause plan qualification issues for the employer and would have to be corrected under EPCRS by requesting return of the distribution plus earnings to the plan.
Permalink Submitted by Michelle Artioli on Mon, 2019-06-24 13:13
The employee is no longer employed but wishes to rollover the funds into a Roth. The employees contributions are Roth contributions but can the employer safe harbor match be rolled into the Roth as well?