one-time election required for Roth 401k?

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skobes
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Joined: Sat Mar 25, 2017 10:41 pm

one-time election required for Roth 401k?

Post by skobes » Mon Feb 11, 2019 10:33 am

Does a designated Roth account in a 401k plan require a one-time election under article XVIII paragraph 7 to defer taxation on earnings accrued but not distributed? US citizen, first year residing in Canada.

If I understand correctly, showing that the Roth 401k is a "pension" under XVIII(3) is sufficient to protect distributions per XVIII(1), but is not sufficient to show that an election under XVIII(7) is not required to protect earnings.

I've asked two accountants already. One said the election is not required, the other was less certain: "If it is considered a separate plan [from the traditional 401k], to which your employer did not make contributions, then it is not a 'pension plan' under Canadian rules. In that case, the election is required."

Vanguard (plan administrator) treats the 401k a single "plan" with multiple "sources" (direct Roth, pre-tax, employer match, backdoor Roth in-plan conversions); the sources are separately tracked but all on one statement. So it would seem strange for CRA to consider the Roth sources a separate "plan"... but possible?

Interested in hearing other opinions here.

nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: one-time election required for Roth 401k?

Post by nelsona » Mon Feb 11, 2019 11:38 am

ALL Roths, whether they be self-funded, self-administered or company funded/administered, need to have a statement filed with CRA with the first tax return one files as a Cdn resident.

No need to argue about angels on the head of a pin on this:

https://www.canada.ca/en/revenue-agency ... ws-43.html

Typically, 401(k)'s are managed as one account, but most certainly the funds inside are segregated into Pre-tax and after tax (both in contributions and growth), so it is "separate". proof of this is that when you levae your firm, it is always suggested to split off the Roth portion to avoid taking unexpected withdrawals from one or the other.
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

nelsona
Posts: 15819
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: one-time election required for Roth 401k?

Post by nelsona » Mon Feb 11, 2019 11:39 am

And this election is to conform with the treaty, which protects Roth only to the extent that no "Cdn contribution" is made.
Nelsona Non grata. Non pro. Search previous posts. Taking period between now and June off. Will only answer sporadically.

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