Originally Posted by
FlyingFort
Let me get this straight. I’m new to United, but have been doing Backdoor Roth IRAs for years, just not 401k’s. I’ve also never had company contributions to a 401k to deal with.
For example: Assume the company puts 16k in my PRAP this year. If I elect to make it “voluntarily post tax”, I can then roll it at the end of the year to my Roth 401k account within the PRAP, without tax implications other than the fact the company has not been withholding for that 16k?
Can I roll previous PRAP contributions that were “traditional” also into the Roth 401k pot? Assuming, I’m willing to pay taxes as regular income on that recharacterization?
Also, some posters said avoid the Schwab Target Date Funds, why?
I know you should never get tax or investing advice from a bunch of pilots on a public forum
Time to call Schwab...
Thanks.
Sent from my iPad using Tapatalk
As to the first question, yes. I do that and it’s a single page authorization form to do it. It’s called an In Plan Roth conversions. As to the second question, I’d say yes as well, but a call to the Schwab rep would be in order. With $10B managed for UAL pilots, they are very responsive. The R&I Booklet is must reading for all this, pages 11-24 in particular.
(800) 724-7526
“Post-Tax
At any time, you may elect to contribute from 1% to 100% of your eligible compensation (less your required taxes and deductions) on a post-tax basis. However, no post-tax contributions will be deducted from your paycheck until you have made the maximum possible pretax/Roth 401(k) deferral contribution for the year (for 2019: $19,000 if you are under age 50; $25,000 if you are 50 or older). Once you have reached these applicable limits, post- tax contributions will begin as of the next payroll cycle. As a result, pretax/Roth 401(k) contributions and post-tax contributions will not be deducted from the same paycheck.
The post-tax balances will be held in a separate account within your PRAP from contributions to your regular pretax 401(k) and Roth 401(k). Earnings on post-tax contributions are not taxable until withdrawn. Post-tax balances may be withdrawn at any time without a qualifying financial hardship, at which time the applicable earnings are subject to federal taxes.
Rollover
You are also permitted to roll over contributions from other qualified retirement plans (i.e., from a previous employer) into your PRAP, with certain limitations.
ROTH CONVERSIONS
Balances in any account sources in the PRAP can be converted to a Roth source. This can be the entire account source or just a portion of it. To convert balances from non-Roth to Roth, call Schwab at 866-855-7727. Any amounts converted to Roth that are not post-tax contributions will be subject to tax in the year converted. You will receive a 1099-R for the taxable amount. Therefore, pilots should carefully consider converting their balances, since the conversion of pretax balances in non-Roth accounts to Roth accounts may trigger a substantial taxable liability.“
https://www.alpa.org/ual/-/media/UAL/Files/eLibraries/Communications/committees/retirement-and-insurance/retirement-insurance-ual-benefits-book.pdf