Search the Community

Hi. I am looking at a 457(f) plan that permits after-tax contributions. Please help me - why would a person want to give their already-taxed compensation back to the employer? Deferral of taxation on earnings for a few years does not seem to warrant the risk of the sponsor's bankruptcy. What am I missing? Thanks! This board'S moderators and contributors are the best! P.S. All I could find on Google and elsewhere was a GuideStone plan adminstrator's guide that had a reference to 457(f) plans that permit after-tax contributions.

My helmet is on too tight. An active participant has a $100,000 balance in the plan. $25,000 is in voluntary after-tax with $20,000 basis. The rest of the money is pre-tax. Based on the plan document and regulations, the participant is only eligible to take a distribution from the voluntary after-tax source. Can the participant rollover the $25,000 to an IRA(s) with a basis of $20,000 based on this... Can I roll over just the after-tax amounts in my retirement plan to a Roth IRA and leave the remainder in the plan? No, you can’t take a distribution of only the after-tax amounts and leave the rest in the plan. Any partial distribution from the plan must include some of the pretax amounts. Notice 2014-54 doesn’t change the requirement that each plan distribution must include a proportional share of the pretax and after-tax amounts in the account. To roll over all of your after-tax contributions to a Roth IRA, you could take a full distribution (all pretax and after-tax amounts), and directly roll over: pretax amounts to a traditional IRA or another eligible retirement plan, and after-tax amounts to a Roth IRA.

I have read online that 401K plans can adopt provisions to enable after-tax contributions *beyond* the $18K/$24K limits of contribution into a Roth 401K. Such a provision would enable an employee to contribute the amount to bring the total 401K annual contribution up to $53K/year. Can anyone refer me to pages that describe these plan provisions in more detail?

Unlike an elective deferral under 402(g) where a partner in a partnership must make the election no later than the last day of the plan year, what is the timing requirement for an after-tax election? Can a partner, in November 2016, write a check and say that it is an after-tax contribution for 2015, assuming no written after-tax election was in place by December 31, 2015?

401(k) participant whose account included after-tax and pre-tax dollars received an otherwise-proper hardship distribution (i.e., authorized by plan, procedures followed, right amount was paid, etc.), but which was paid entirely out of pre-tax deferrals (i.e., the distribution was paid without regard to the ordering rule requiring it to have been paid first out of after-tax dollars). To pluck some numbers out of thin air, let's say that a $10,000 hardship distribution was paid entirely out of pre-tax dollars, rather than $1,000 after-tax (representing the full after-tax account balance) and $9,000 pre-tax. As a result, the administrator treated the entire $10,000 distribution as taxable and subject to the 10% early withdrawal penalty. But if the first $1,000 had properly come out of the after-tax account, the amount of P's basis in the after-tax account shouldn't have been reduced. So the plan isn't out any money, but the tax hit to the participant was a bit larger than it should have been. To me, it seems reasonable under the general correction principles to fix this by cutting P a check for the amount of the improper tax hit (plus interest), and moving the remaining after-tax dollars into P's pre-tax account. But EPCRS doesn't seem to directly address this scenario. Anyone encountered this before? Thoughts? E: I suppose one might argue that this is, really, a failure to have initially required P to withdraw the after-tax amounts before receiving the hardship, which could be corrected by requiring repayment of the portion that shouldn't have been distributed in the first place. But from the plan's perspective, the right amount (in absolute terms, anyway) was paid out. Any repayment would presumably be made with after-tax money anyway, so requiring that additional steps seems like an overly complex means of reaching the same result you'd get by recharacterizing the remaining after-tax dollars already in the plan as pre-tax...