topic Do Roth IRA contributions count toward defined contribution plan limits? in Retirement tax questions

Do Roth IRA contributions count toward defined contribution plan limits?

ensingbd — Fri, 08 Nov 2019 17:18:18 GMT

With the IRS announcing the 2020 limits for DC plans as $57,000/year, up from $56,000, and the IRA contribution limits staying at $6,000, am I able to contribute the maximum to each ($63,000 not considering catch up provisions). Or do the Roth IRA contributions count toward the $57,000 limit?

Re: Do Roth IRA contributions count toward defined contribution plan limits?

Anonymous — Fri, 08 Nov 2019 18:48:58 GMT

ROTH contributions count against the maximum,

Re: Do Roth IRA contributions count toward defined contribution plan limits?

ensingbd — Fri, 08 Nov 2019 18:58:49 GMT

Thank you. Do you have an IRS guideline that specifies that? I only ask because my company's HR team said the exact opposite - IRS considers IRA and 401k accounts separate for contribution purposes. I can't seem to find an answer either way in IRS rulebook.

Re: Do Roth IRA contributions count toward defined contribution plan limits?

dmertz — Fri, 08 Nov 2019 19:03:16 GMT

The Roth IRA contribution limit is independent of defined contribution plan limits. However, defined contribution plans can offer a "designated Roth account" (which is not a Roth IRA) that is subject to the limits for defined contribution plans.

The amount of your compensation and the terms of the defined contribution plan will determine if you are able to contribute a total of $57,000 to the defined contribution plan and separately $6,000 to a Roth IRA. Deductible contributions to the defined contribution plan (including elective deferrals to the traditional account in the plan but not elective contributions to a designated Roth account in the plan) reduce the amount of compensation available to contribute to a Roth IRA. Your eligibility to contribute to a Roth IRA also depends on your filing status and modified AGI for the purpose, and someone with sufficient income to contribute $57,000 to a defined contribution plan is likely to have a modified AGI that exceeds the limit above which one is not eligible to contribute to a Roth IRA.

Re: Do Roth IRA contributions count toward defined contribution plan limits?

macuser_22 — Fri, 08 Nov 2019 19:06:40 GMT

@ensingbd wrote:

Or do the Roth IRA contributions count toward the $57,000 limit?

IRA yearly contribution limits are totally separate from employer retirement plan limits. One has no effect on the other at all, however, Roth contribution limits can depend on MAGI as can Traditional IRA deduction limits when covered by a retirement plan at work.

Note that employer Roth plans (designated Roth) are NOT IRA's so the total employer plan limits apply.

The most you can contribute to all of your traditional and Roth IRAs is the smaller of:

For 2018, $5,500, or $6,500 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.
For 2019, $6,000, or $7,000 if you’re age 50 or older by the end of the year; or
your taxable compensation for the year.

(Taxable compensation is generally wages that you worked for - W-2 or net self-employed income minus the deducible part of the SE tax, but can include commissions, alimony and separate maintenance, and nontaxable combat pay ).

See this IRS article for Roth contribution limits:

https://www.irs.gov/retirement-plans/roth-iras