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TomT99
Level 1

After-Tax 401(k) Plan Contributions

I rolled over some of the pre-tax funds in my 401(k) plan to Roth 401(k) funds this last year (in the same plan). I believe the funds went into what is referred to as a "designated 401(k) (account)". After I entered the figures from my 1099-R into Turbotax, it asked me whether or not the funds went into a designated 401(k). I replied "Yes". Then, Turbotax asked me:

Did you make any after-tax contributions to your 401(k), 403(b), or governmental 457(b) plan? These would be contributions you made into the plan yourself, rather than being made by your company on your behalf. (This is not common.)

Is my understanding correct that, by "after-tax contributions" they mean after tax contributions I made other than contributions made to a designated Roth account via regular payroll deductions that I directed my company to make. I.e., do they mean "after-tax contributions" as referred to in this article:

https://www.thebalance.com/after-tax-contributions-to-your-retirement-plan-4056252

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Accepted Solutions
MaryK1101
Expert Alumni

After-Tax 401(k) Plan Contributions

That is correct.  The after-tax contributions are not pre-tax and not a designated ROTH contribution.  

 

Both Roth elective deferrals and after-tax contributions are similar in tax treatment initially and during the years before retirement. The primary difference involves tax treatment for withdrawals. At retirement, qualified distributions of Roth funds are completely tax-free, whereas withdrawals of after-tax contributions will have taxes due on the earnings.
Another difference involves liquidity — after-tax contributions are not subject to the same distribution restrictions as Roth elective deferrals (i.e., Roth elective deferrals are available only at death, disability, separation of service, attainment of age 59 ½ or hardship).

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1 Reply
MaryK1101
Expert Alumni

After-Tax 401(k) Plan Contributions

That is correct.  The after-tax contributions are not pre-tax and not a designated ROTH contribution.  

 

Both Roth elective deferrals and after-tax contributions are similar in tax treatment initially and during the years before retirement. The primary difference involves tax treatment for withdrawals. At retirement, qualified distributions of Roth funds are completely tax-free, whereas withdrawals of after-tax contributions will have taxes due on the earnings.
Another difference involves liquidity — after-tax contributions are not subject to the same distribution restrictions as Roth elective deferrals (i.e., Roth elective deferrals are available only at death, disability, separation of service, attainment of age 59 ½ or hardship).

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

View solution in original post

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