September 2020 Vol. I, Issue 2
Reporting Roth vs. After-tax Contributions
Participants may choose among three different contribution types when electing to make personal contributions to the United Methodist Personal Investment Plan (UMPIP): before-tax, Roth and after-tax. (Horizon 401(k) Plan participants can choose before-tax and/or Roth contributions; no after-tax.)
With both Roth and after-tax contributions, a participant pays income taxes (and FICA taxes) at the time they contribute to the plan, but only Roth offers the opportunity to receive tax-free distributions of earnings on the contributions. Generally, after-tax contributions are elected by participants wanting to contribute more than the $19,500 annually in combined before-tax and Roth contributions ($26,000 if over age 50).
You'll want to make sure Roth contributions are correctly coded in payroll, on your participants' W-2s and in Contribution Management:
On the W-2:
- Designated Roth contributions to UMPIP should be reported using code BB in box 12.
- Designated Roth contributions to Horizon should be reported using code AA in box 12.
- After-tax contributions are not elective deferrals and may be reported in box 14, but not in box 12.
Each individual situation is different. If participants have questions about what type(s) of contributions they should make, they can review the Roth Contribution Guide or call EY Financial Planning Services at 1-800-360-2539.
In Contribution Management:
First, make sure the correct type of contribution election (e.g., before-tax, Roth or after-tax) for each participant has been provided to Wespath, either on a Contribution Election form or by inputting the election directly in Benefits Access Portal.
- If Wespath generates your contribution file each month, check that the contribution type is correct for each participant before scheduling your payment. If the contribution type is not correct, edit the participant's record for the current contribution period, but correct the election as noted above for future contribution periods.
- If you generate and upload your contribution files, make sure the column name is correctly labeled for each type of contribution – "UMPIP BeforeTax", "UMPIP Roth" or "UMPIP AfterTax"; or "Horizon BeforeTax" or "Horizon Roth" – as described in the Payroll File Template.
If you discover that you have already remitted contributions with the incorrect contribution type, please contact Wespath for assistance at 1-800-851-2201. Select 3, then 2 to reach a Contributions team member. Or you may send a request to correct the account(s) to pateam@wespath.org.
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