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I have an S-corp for which I recently established an Individual 401K plan with one of the top 4 plan administrators. I understand that the employee contribution can be either traditional or Roth. However, since the company matching contribution (25% of the employee's salary) is treated as an expense to the S-corp, it is made as a traditional contribution i.e. tax deferred. My question is if the company's matching contribution can be made as a Roth, after allowing the employee to pay taxes on that matching contribution?

I know that the major brokerages who have pre-built Individual 401K plans don't allow for this. But, can a custom plan be built and submitted to IRS for approval where the employee and the company contributions are BOTH treated as Roth?

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No. But. If the provider offers a Roth 401(k), you should have the ability to convert from your pre-tax side to the Roth side, and pay the tax. The net result should be the same, I believe.

  • I think he is asking about whether it is possible to have the employer contribution go into a Roth 401k (the standard answer is employer contributions are to the Traditional side only) by setting up a special 401k plan and getting a Revenue ruling that it is acceptable. Can an employee take the employer match and roll it over into a Roth 401k? Maybe for a Solo 401k (subject to a Revenue ruling)? – Dilip Sarwate Dec 3 '14 at 22:24
  • Yes, I see what he wants, but there's no need. In-plan conversion isn't, or shouldn't be, a problem. – JoeTaxpayer Dec 3 '14 at 22:26

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