Roth 401k with Employer Contributions - When taxed?

[ESmithCA]

I rolled over my Vanguard Roth 401k into a Schwab Roth IRA in August 2024. Vanguard’s Disbursement Confirmation Letter clearly distinguished my post-tax employee contributions as non-taxable, and my employer’s pre-tax contributions as being taxable as ordinary income.

My question is: When is the employer contribution taxed? Upon rollover into a different Roth account (2024 taxes) or when it is ultimately withdrawn many years from now?

The 1099-R that I received from Vanguard shows the full amount as Gross Distributions and declares there is no amount taxable. When I asked Schwab, they said the employer’s contributions were in effect converted upon the rollover and were taxable now, while Vanguard states a roll-over is a roll-over and there was no taxable event. There is very little information online, and it is somewhat contradictory.

[jtax]

I don't have the detailed knowledge on designated Roths and 401ks to give you a definitive answer, but this reference might help you get a little further.

The book described at this site is by the most distinguished lawyer specializing in retirement planning tax laws. It is very dense, but very thorough, and very helpful if you can read statutes and regulations. It might or might not be too technical. It looks like sections 5.7 and 5.7.06, .08 would apply to your situation.

https://ataxplan.com/about-natalie-choate/

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Warning the book is aimed at lawyers and very technical and dense. But it might get you a little further. You might be able to ask the author or the e-book support for a referral. That might be the best way to get a definitive answer unless you get a better post here.