Ability for employee making elective deferrals to employer’s 401(k) ROTH and to his own ROTH IRA
An employee under the age of 50 whose employer has a 401(k) plan with a ROTH feature makes an elective deferral to this 401(k) ROTH of $12,000.00. Does this impact the contribution that the employee can make to his own ROTH IRA? Page 37 of the 2020 Publication 590-A states that a contribution to one does not impact one’s eligibility to contribute to the other. However, IRS publications are not statutory authority and in reading IRC §402A and §408(q) my understanding and conclusion differ. I welcome thoughts and guidance please. Thank you.
Permalink Submitted by Alan - IRA critic on Fri, 2021-04-09 15:19
408q does not relate to this. I have never heard of a plan that used deemed IRA accounts. Your Roth 401k contribution under 402A has no direct impact on your Roth IRA contributions. However, if you formerly did pre tax 401k contributions, switching to Roth 401k will increase your MAGI for Roth IRA contribution purposes. This could indirectly push your MAGI up into the Roth IRA phaseout range.