ERISA consultants at the Retirement Learning Center (RLC) Resource Desk regularly receive calls from financial advisors on a broad array of technical topics related to IRAs, qualified retirement plans and other types of retirement savings and income plans, including nonqualified plans, stock options, and Social Security and Medicare. We bring Case of the Week to you to highlight the most relevant topics affecting your business.
A recent call with a financial advisor from Rhode Island is representative of a common inquiry related to 401(k) after-tax contributions. The advisor asked: “My client has made non-Roth, after-tax contributions to his 401(k) plan for 2023. Will those amounts be reported on Form W-2 and, if so, where?”
Highlights of the Discussion
The answer is “maybe.” Your client will want to discuss this question with his employer and tax advisor for a definitive answer.
Generally, according to the instructions to IRS Form W-2, Wage and Tax Statement, your employer may, but is not required to, report non-Roth, after-tax contributions on Form W-2 in box 14. As you will see when you look at the form, box 14 serves as a catch-all for several miscellaneous types of plan contributions, including after-tax contributions, nonelective employer contributions made on behalf of an employee, required employee contributions and employer matching contributions. An employer may also use this box to report any other information that it wants to give to an employee, including such things as state disability insurance taxes withheld, union dues, uniform payments, health insurance premiums deducted, nontaxable income, educational assistance payments, or a minister's parsonage allowance and utilities. Each distinctive item should be labeled.
Because Form W-2 may not be a reliable source for tracking after-tax contributions, a best practice for a plan participant would be to keep his or her own records and double check them against what the plan’s recordkeeper shows. If there is a discrepancy, a plan participant should alert the plan sponsor and recordkeeper, and work to resolve any differences.
Conclusion
According to the Form W-2 instructions, employers may, but are not required to, report non-Roth, after-tax contributions on Form W-2 in box 14. Consequently, Form W-2 may not be a reliable source for tracking after-tax contributions and contributors should monitor their plan account information and keep personal records as a way to doublecheck for accuracy.
Any information provided is for informational purposes only. It cannot be used for the purpose of avoiding penalties and taxes. Consumers should consult with their tax advisor or attorney regarding their specific situation.
©2023, Retirement Learning Center, LLC. Used with permission.
