How Are Employers’ Roth Contributions Reported for Participants’ Income Taxes?

Q: Our retirement plan allows an employee to designate employer contributions as Roth. If an employee elects to have his/her employer match deposited as Roth, does the amount get reported on a W-2 or 1099 for tax purposes?

A: This is a timely question, as the issue was specifically addressed in the recently issued IRS Notice 2024-2. In that notice, Section L-9 offers a helpful Q&A regarding the reporting and taxation of designated Roth employer contributions:

1. If designated Roth matching contributions or designated Roth nonelective contributions are allocated to an individual’s account in a taxable year, what reporting obligations apply to those contributions?
2. The reporting obligations that apply to a designated Roth matching contribution or designated Roth nonelective contribution are the same as if: (1) the contribution had been the only contribution made to an individual’s account under the plan, and (2) the contribution, upon allocation to that account, had been directly rolled over to a designated Roth account in the plan as an in-plan Roth rollover. Thus, designated Roth matching contributions and designated Roth nonelective contributions to a qualified plan under section 401(a) or to a section 403(b) plan must be reported using Form 1099-R for the year in which the contributions are allocated to the individual’s account. The total amount of designated Roth matching contributions and designated Roth nonelective contributions that are allocated in that year are reported in boxes 1 and 2a of Form 1099-R, and code “G” is used in box 7.

Thus, Form 1099-R, and not Form W-2, is used for tax reporting.

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

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