Do companies match after-tax 401k contributions?

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radnor
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Do companies match after-tax 401k contributions?

Post by radnor »

My employer offers 401k contribution matching (in addition to employer contributions that they make in any case, regardless of my contributions). I'm assuming that if I switch over to making after-tax contributions (for the purpose of doing a mega backdoor Roth), then I can expected the employer match and additional contributions to still happen?
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willthrill81
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Re: Do companies match after-tax 401k contributions?

Post by willthrill81 »

radnor wrote:My employer offers 401k contribution matching (in addition to employer contributions that they make in any case, regardless of my contributions). I'm assuming that if I switch over to making after-tax contributions (for the purpose of doing a mega backdoor Roth), then I can expected the employer match and additional contributions to still happen?
They should, but check with HR first.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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BrandonBogle
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Re: Do companies match after-tax 401k contributions?

Post by BrandonBogle »

I would imagine all that offer matching do so even if you are contributing after-tax, but check with HR/your plan docs to be sure.

That said, bear in the mind that employer matches would be on a pre-tax basis.
an_asker
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Re: Do companies match after-tax 401k contributions?

Post by an_asker »

radnor wrote:My employer offers 401k contribution matching (in addition to employer contributions that they make in any case, regardless of my contributions). I'm assuming that if I switch over to making after-tax contributions (for the purpose of doing a mega backdoor Roth), then I can expected the employer match and additional contributions to still happen?
Is this question about the contribution to the $18k pretax 401(k) limit in the form of a Roth 401k or to some higher limit even past the pretax limit (i.e., it includes after-tax contributions in addition)
avalpert
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Re: Do companies match after-tax 401k contributions?

Post by avalpert »

Why wouldn't you be using the pre-tax or Roth 401k for your first $18,000 anyway? Does your employer match more than $18,000 in contributions?
retiredjg
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Re: Do companies match after-tax 401k contributions?

Post by retiredjg »

The law apparently allows your employer to match your after-tax contributions. Some plans do according to posts from several posters. You will have to check your plan to find out what your plan does.
ERISA Stone
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Re: Do companies match after-tax 401k contributions?

Post by ERISA Stone »

Read your Summary Plan Description (SPD). It should tell you.
retiredjg
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Re: Do companies match after-tax 401k contributions?

Post by retiredjg »

When you say "switch over", I hope you don't mean making after-tax contributions instead of tax-deferred contributions.
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radnor
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Re: Do companies match after-tax 401k contributions?

Post by radnor »

an_asker wrote:Is this question about the contribution to the $18k pretax 401(k) limit in the form of a Roth 401k or to some higher limit even past the pretax limit (i.e., it includes after-tax contributions in addition)
alavpert wrote:Why wouldn't you be using the pre-tax or Roth 401k for your first $18,000 anyway? Does your employer match more than $18,000 in contributions?
retiredjg wrote:When you say "switch over", I hope you don't mean making after-tax contributions instead of tax-deferred contributions.
To clarify, I asked this question because my plan is to max out the $18k pre-tax limit, and then do after-tax contributions (that I will immediately roll over to a Roth IRA, i.e., do a mega-backdoor-Roth). Don't worry; I'm not giving up that sweet, sweet, $18k-worth of tax deductions :mrgreen:
Last edited by radnor on Tue Feb 21, 2017 8:17 pm, edited 2 times in total.
Dottie57
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Re: Do companies match after-tax 401k contributions?

Post by Dottie57 »

radnor wrote:My employer offers 401k contribution matching (in addition to employer contributions that they make in any case, regardless of my contributions). I'm assuming that if I switch over to making after-tax contributions (for the purpose of doing a mega backdoor Roth), then I can expected the employer match and additional contributions to still happen?

My employer doesn't even allow after tax contributions unless it comes from my paycheck and is placed in the Roth 401k.
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Re: Do companies match after-tax 401k contributions?

Post by FoolishJumper »

radnor wrote:To clarify, I asked this question because my plan is to max out the $18k pre-tax limit, and then do after-tax contributions (that I will immediately roll over to a Roth IRA, i.e., do a mega-backdoor-Roth). Don't worry; I'm not giving up that sweet, sweet, $18k-worth of tax deductions :mrgreen:
As mentioned above, check your SPD, but I can almost promise that they will stop matching after you reach your $18k limit. My only basis is that I had an employer with a very attractive match (safe harbor plus some), and they stopped match after the $18k. Keep in mind that your employer has specifically requested to include after tax contributions past the $18k limit, so they've likely made clear that the match stops then...
robertalpert
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Re: Do companies match after-tax 401k contributions?

Post by robertalpert »

My employer does a match into my Roth 401-K, But the employer match portion is pre-tax. They may appear co-mingled, but Merrill Lynch keeps track of the match amount versus the employee contributions. When I asked, --- Merrill Lynch agreed that each portion can be transferred out separately into separate IRAs after retiring from employment.
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Re: Do companies match after-tax 401k contributions?

Post by Alan S. »

robertalpert wrote:My employer does a match into my Roth 401-K, But the employer match portion is pre-tax. They may appear co-mingled, but Merrill Lynch keeps track of the match amount versus the employee contributions. When I asked, --- Merrill Lynch agreed that each portion can be transferred out separately into separate IRAs after retiring from employment.
I think you meant to say that your employer pays a match ON your Roth 401k contributions, but the match is PAID INTO the pre tax account.
robertalpert
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Re: Do companies match after-tax 401k contributions?

Post by robertalpert »

Alan S. wrote:
I think you meant to say that your employer pays a match ON your Roth 401k contributions, but the match is PAID INTO the pre tax account.
Employer does match ON the Roth 401K, but a separate pre-tax account is not visible to me. But can view the assets by source: "Employee_contribution" and "Employer_match"
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BrandonBogle
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Re: Do companies match after-tax 401k contributions?

Post by BrandonBogle »

robertalpert wrote:My employer does a match into my Roth 401-K, But the employer match portion is pre-tax. They may appear co-mingled, but Merrill Lynch keeps track of the match amount versus the employee contributions. When I asked, --- Merrill Lynch agreed that each portion can be transferred out separately into separate IRAs after retiring from employment.
Some, like my current employer's 401k, will let you xfer out the employer contributions while still in-service. I have no desire to given an excellent lineup in my 401k, but an option if I wanted to take advantage of it.

Actually, I learned this b/c while my current 401k is great, my former employer's 401k at Vanguard is even better. Sadly, while I am allowed to keep that 401k in perpetuity, I am not allowed to roll over into it anymore funds unless I get rehired by that employer. That is unlikely.
sesq
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Re: Do companies match after-tax 401k contributions?

Post by sesq »

My employer does not match after tax. It does for traditional or roth.
SRenaeP
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Re: Do companies match after-tax 401k contributions?

Post by SRenaeP »

Dottie57 wrote:
radnor wrote:My employer offers 401k contribution matching (in addition to employer contributions that they make in any case, regardless of my contributions). I'm assuming that if I switch over to making after-tax contributions (for the purpose of doing a mega backdoor Roth), then I can expected the employer match and additional contributions to still happen?

My employer doesn't even allow after tax contributions unless it comes from my paycheck and is placed in the Roth 401k.
Note that after tax contributions are *not* the same as Roth 401k contributions.

-Steph
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Earl Lemongrab
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Re: Do companies match after-tax 401k contributions?

Post by Earl Lemongrab »

radnor wrote:To clarify, I asked this question because my plan is to max out the $18k pre-tax limit, and then do after-tax contributions (that I will immediately roll over to a Roth IRA, i.e., do a mega-backdoor-Roth). Don't worry; I'm not giving up that sweet, sweet, $18k-worth of tax deductions :mrgreen:
That's exactly what I do. My plan limits regular contributions to 30%, so I just set it to the max let it go. After the deferral limit is reached it switches to after-tax so those accumulate at the end of the year and get rolled out at the start of the next. The plan matches either type (and Roth of course).
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Earl Lemongrab
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Re: Do companies match after-tax 401k contributions?

Post by Earl Lemongrab »

FoolishJumper wrote:As mentioned above, check your SPD, but I can almost promise that they will stop matching after you reach your $18k limit.
You should not promise things that aren't true. As I noted above, my plan continues matching as long as you are contributing. That's good, because they don't do true-up match, so I'd miss some if they stopped at 18k.

Note that it does not mean that all plans work like mine, just that some do. And some have true-up so it wouldn't matter.
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Re: Do companies match after-tax 401k contributions?

Post by retiredjg »

FoolishJumper wrote:As mentioned above, check your SPD, but I can almost promise that they will stop matching after you reach your $18k limit.
As pointed out, this is not always correct. However I think what you are meaning to say is that you won't get "extra" match by contributing more and I think that is probably true. Or mostly true. Most (all?) plans have a maximum for the match. Often, this is achieved by contributing the $18k over the entire year.

Some plans do the match by pay period - if you don't contribute to some portion of the 401k during the pay period, you miss the match that pay period. So the people who contribute their whole $18k in the first few months of the year will lose some match if they don't continue to contribute somewhere. That "somewhere" is the after- tax account.
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BrandonBogle
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Re: Do companies match after-tax 401k contributions?

Post by BrandonBogle »

retiredjg wrote:
FoolishJumper wrote:As mentioned above, check your SPD, but I can almost promise that they will stop matching after you reach your $18k limit.
As pointed out, this is not always correct. However I think what you are meaning to say is that you won't get "extra" match by contributing more and I think that is probably true. Or mostly true. Most (all?) plans have a maximum for the match. Often, this is achieved by contributing the $18k over the entire year.

Some plans do the match by pay period - if you don't contribute to some portion of the 401k during the pay period, you miss the match that pay period. So the people who contribute their whole $18k in the first few months of the year will lose some match if they don't continue to contribute somewhere. That "somewhere" is the after- tax account.
This was the case at my employer before we switched to a Safe Harbor plan with quarterly True-Ups. If you didn't continue to contribute 6% every pay period after reaching 18k until the end of the year, you missed out on some match. Now, as long as you put in 1.5% each quarter, you get your full match (sadly, they also got rid of allowing after-tax contributions but allow Roth contributions now).
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Re: Do companies match after-tax 401k contributions?

Post by howdy007 »

My employer also allows before tax, after tax and roth. So, far I've been contributing to before tax contributions and investing in few funds. If I max out and start contributing to after-tax and invest in the same funds, how does my brokerage keep track of what is after tax funds/money v/s before tax funds/money. Do they create separate section for each one of them. Thx
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Re: Do companies match after-tax 401k contributions?

Post by BrandonBogle »

howdy007 wrote:My employer also allows before tax, after tax and roth. So, far I've been contributing to before tax contributions and investing in few funds. If I max out and start contributing to after-tax and invest in the same funds, how does my brokerage keep track of what is after tax funds/money v/s before tax funds/money. Do they create separate section for each one of them. Thx
All the 401ks I've had show a consolidated balance for the total account and per holding, but they also had a view to see each "subaccount". The proportion of my holdings in each subaccount is the same (like 70% S&P 500, 20% Russell 2000, 10% Total Bond, etc.), but the total dollar amounts are for Employee Traditional Contributions, Employee Roth Contributions, Employee After-Tax Contributions, Employer Match, Safe Harbor Matching, Profit Sharing, etc. It is likely your 401k Administrator does the same.
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Re: Do companies match after-tax 401k contributions?

Post by howdy007 »

BrandonBogle wrote:
howdy007 wrote:My employer also allows before tax, after tax and roth. So, far I've been contributing to before tax contributions and investing in few funds. If I max out and start contributing to after-tax and invest in the same funds, how does my brokerage keep track of what is after tax funds/money v/s before tax funds/money. Do they create separate section for each one of them. Thx
All the 401ks I've had show a consolidated balance for the total account and per holding, but they also had a view to see each "subaccount". The proportion of my holdings in each subaccount is the same (like 70% S&P 500, 20% Russell 2000, 10% Total Bond, etc.), but the total dollar amounts are for Employee Traditional Contributions, Employee Roth Contributions, Employee After-Tax Contributions, Employer Match, Safe Harbor Matching, Profit Sharing, etc. It is likely your 401k Administrator does the same.
Thanks. just a followup question. When I do in-plan rollover of after-tax to roth ira, can i rollover to my existing roth ira account (primarily for backdoor roth ira) or should I keep it in a dedicated new roth ira account for tax purposes or any other reasons.
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BrandonBogle
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Re: Do companies match after-tax 401k contributions?

Post by BrandonBogle »

howdy007 wrote:When I do in-plan rollover of after-tax to roth ira, can i rollover to my existing roth ira account (primarily for backdoor roth ira) or should I keep it in a dedicated new roth ira account for tax purposes or any other reasons.
I rolled over my after-tax to my sole roth IRA in 2014. So far, it hasn't been a problem NOT having it separated, but I'm also only in my 30s and maybe there is some benefit closer to (early) retirement age. That said, the only thing I really have in the cobwebs of my mind about tracking IRA funds is if you ever want to roll the funds INTO another 401k, it is easiest if rollover and contributed amounts are not co-mingled, or else you have to do more math. For me, it wasn't a concern, but I may have just "in one ear, out the other" many details since it didn't apply/matter to me. Hopefully others will chime in too.
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Re: Do companies match after-tax 401k contributions?

Post by retiredjg »

I don't think it is important to keep the funds separate. What is important is keeping meticulous records of how all the money got into the Roth IRA. You will need these records if you ever take money from the Roth IRA before age 59.5 so keep the records until your mid 60's at least. This is because direct contributions and contributions through conversion or rollover from after tax accounts get different treatment at withdrawal time.
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Re: Do companies match after-tax 401k contributions?

Post by retiredjg »

BrandonBogle wrote:That said, the only thing I really have in the cobwebs of my mind about tracking IRA funds is if you ever want to roll the funds INTO another 401k, it is easiest if rollover and contributed amounts are not co-mingled, or else you have to do more math.
This can apply to tIRA, but I don't believe it is even possible to roll Roth IRA to 401k, is it?
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Re: Do companies match after-tax 401k contributions?

Post by Spirit Rider »

retiredjg wrote:
BrandonBogle wrote:That said, the only thing I really have in the cobwebs of my mind about tracking IRA funds is if you ever want to roll the funds INTO another 401k, it is easiest if rollover and contributed amounts are not co-mingled, or else you have to do more math.
This can apply to tIRA, but I don't believe it is even possible to roll Roth IRA to 401k, is it?
You are correct. Roth IRA accounts can only be rolled over to another Roth IRA account.
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BrandonBogle
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Re: Do companies match after-tax 401k contributions?

Post by BrandonBogle »

Spirit Rider wrote:
retiredjg wrote:
BrandonBogle wrote:That said, the only thing I really have in the cobwebs of my mind about tracking IRA funds is if you ever want to roll the funds INTO another 401k, it is easiest if rollover and contributed amounts are not co-mingled, or else you have to do more math.
This can apply to tIRA, but I don't believe it is even possible to roll Roth IRA to 401k, is it?
You are correct. Roth IRA accounts can only be rolled over to another Roth IRA account.
Thank you for making me look. I recalled my 401k allows me to rollover Roths, but it explicitly says Roth former employer-sponsored accounts vs. IRAs.
MegaCorp 401k SPD wrote: If you are an eligible team member, you may be able to roll over a distribution from your former employer’s qualified retirement plan, an Internal Revenue Code Section 403(b) plan, or an IRA to this 401(k) Plan. Roth contributions and after-tax contributions from your former employer’s qualified retirement plan may also be rolled to this 401(k) Plan.
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Earl Lemongrab
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Re: Do companies match after-tax 401k contributions?

Post by Earl Lemongrab »

Tax law prohibits rolling over Roth IRAs to qualified plans.
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Re: Do companies match after-tax 401k contributions?

Post by howdy007 »

retiredjg wrote:This is because direct contributions and contributions through conversion or rollover from after tax accounts get different treatment at withdrawal time.
@retiredjg - interesting. Can you elaborate or point me to any source on how they are treated separately at withdrawal.

@BrandonBogle - thanks for the response
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Re: Do companies match after-tax 401k contributions?

Post by retiredjg »

howdy007 wrote:@retiredjg - interesting. Can you elaborate or point me to any source on how they are treated separately at withdrawal.
It can be quite complicated, but if you have the information at hand, the IRS has a worksheet for you to use.

Go to the Fairmark.com site and search for Roth withdrawals or Roth withdrawal order. That webpage will give you the basic information. In the comments section, search for an informal chart by dihwill or dwalli or some name like that.

You can also do a search in the google box above for previous threads on the issue. You may have to search a lot of them to find a good discussion because those words are so frequently used.
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Re: Do companies match after-tax 401k contributions?

Post by cherijoh »

willthrill81 wrote:
radnor wrote:My employer offers 401k contribution matching (in addition to employer contributions that they make in any case, regardless of my contributions). I'm assuming that if I switch over to making after-tax contributions (for the purpose of doing a mega backdoor Roth), then I can expected the employer match and additional contributions to still happen?
They should, but check with HR first.
My former employer offered an after-tax option (back then the annual pre-tax limit was lower than my company's contribution limit of 15% of salary). The company matched 1:1 up to a 5% employee contribution (including any after-tax contributions).

But even if your company matches after-tax contributions, it would be a moot point if you hit the maximum match amount before you hit your annual pre-tax limit. Unless of course you opted for only making after-tax contributions, which wouldn't make a whole lot of sense.

In addition, the IRS sets a maximum limit on the amount that is considered "eligible compensation" for your plan and your company may set an even lower limit. My current company matches 1:1 up to 5% and sets the limit for eligible compensation at $250K. Therefore the maximum possible match amount occurs for the highest wage earners when they contribute $12.5K, which is well below the IRS annual limit for pre-tax contributions.
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