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Lane
Lane, CFP, MBA, CRPS
Category: Single Problem
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Experience:  I have been providing tax and finance to individuals businesses and students since 1986
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This is for Megan C or VirtualCPA Which funds can be allocated

Resolved Question:

This is for Megan C or VirtualCPA

Which funds can be allocated to a designated roth account?

Employee post-tax contributions
Employer-matching contributions
Plan forfeitures
Employee pre-tax contributions

I am thinking it is the first one.

Please provide the reasoning for those that are not correct.

Thanks.
Submitted: 9 months ago.
Category: Single Problem
Expert:  Lane replied 9 months ago.

Lane :

Hi, I sent Megan a message and so far she's not responding (she may be teaching a class) would you like me to opt out? (which will essentially put your question ut there for ANY available expert) or would you like me to help you? --- In that scenario, if I get reply, I'll pass to her ... so far nothing (I CAN help with this, I am a Chartered Retirement Plans Specialist

Lane :

OK, not getting anything back from her OR you. I'll answer and provide the IRS information directly from their site

Lane :

Can employers allocate plan forfeitures to designated Roth accounts?


Employers can only allocate designated Roth contributions and rollover contributions (and earnings on these contributions) to designated Roth accounts. The employer may not allocate forfeitures, matching or any other employer contributions to any designated Roth accounts.

Lane :

As you can see, this one statement actually answers your question (and shows that you are correct) Post tax contributions are what IRS is calling Designated Roth Contributions (ALL Roth contributions are post tax ... even Roth conversion are taxed as they happen so that any money GOING IN is an after tax dollar ... you can essentially use the terms ROth Contributions and Post-Tax contributions interchangeably)

Lane :

Further, as IRS tells you here, The employer MAY NOT allocate plan forfeitures

Lane :

Finally (from the same IRS Q&A site), you see that even though an employer may MATCH designated Roth Contributions, the employer must ALLOCATE any match made ON the Roth contribution to a PRE-TAX account See the following:

Lane :

Can my employer match my designated Roth contributions? Must my employer allocate the matching contributions to a designated Roth account?


Yes, your employer can make matching contributions on your designated Roth contributions. However, your employer can only allocate your designated Roth contributions to your designated Roth account. Your employer must allocate any contributions to match designated Roth contributions into a pre-tax account, just like matching contributions on traditional, pre-tax elective contributions.

Lane :

I STILL don't see you coming into the chat here ... But this should give you everything you need, (including the IRS guidance itself)

Lane :

I'll move us to the "Q&A" mode. … Maybe that will help … (We can still continue a dialogue there, just not in real-time chat, as we can here)

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane, CFP, MBA, CRPS
Category: Single Problem
Satisfied Customers: 3644
Experience: I have been providing tax and finance to individuals businesses and students since 1986
Lane and other Single Problem Specialists are ready to help you
Customer: replied 9 months ago.
Lane, is the answer the first one?
Expert:  Lane replied 9 months ago.
Yes, the answer IS the first one

See the explanation above for the rationale

Lane
Expert:  Lane replied 9 months ago.

Thanks Diana..

Your questions posted at 4:31 and I DID get that message reply from Megan at 4:44.

I owe Megan a question.

Also, next time, if you'll submit under business and finance homework, that will get it to the right folks.

This came in under Tax, so I thought you were a retirement plan trustee or provider.

Sorry for the confusion
Customer: replied 9 months ago.

Hi Lane,

 

I want it to come under Tax. I am a tax professional and needed some help.

Expert:  Lane replied 9 months ago.

In that case we're good.

I hope the rationale wasn't too wordy ... just wanted to give it to you from the horse's (IRS) mouth.

The logic, however, is that Designated Roth Accounts are after tax contribution vehicles (interest grows tax deferred), but the ONLY thing going in (either througH contributions or CONVERSIONS) ARE PRE-TAX DOLLARS.

Glad I could help

Lane
Customer: replied 9 months ago.

Lane,

 

Did you mean pre-tax dollars?

Expert:  Lane replied 9 months ago.


WOOPS.

NO

As I think you know

(so rarely use the term POST TAX DOLLARS)

Sorry, ROTH = AFTER TAX contributions only

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