Make sure it’s really Roth and not pre-tax and vice versa

As more and more employees are deferring on a Roth after-tax basis, there will be more errors on whether the contributions are made after-tax or pro-tax and vice versa. Changing Roth to pre-tax and ore-tax to Roth is a giant accounting headache. It’s correcting an incorrect payroll issue, that will also require a corrected W2 if the change is made after the issue of one.

Plan providers and plan sponsors need to focus on whether deferrals are made pre-tax or post-tax and administer it that way. Otherwise, more mistakes will be made and the fix isn’t fun and is labor intensive.

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