Roth 401(k) - Canadian resident contributions?

[Taxman23]

The IRS recently announced 401(k) catch-up contributions must be allocated to a Roth 401(k) for high income earners ($145k+) starting Jan 1, 2026.

I'm curious how this may impact Canadian residents with US Roth 401(k)s. My understanding was that CRA did not treat Roth 401(k) plans like Roth IRAs, but rather viewed Roth 401(k) plans as a "feature" of a 401(k) and the Canadian tax treatment "follows that of the underlying plan of which it's a feature" (ie. the regular 401(k) plan). So essentially no election required in Canada to defer current taxation (unlike Roth IRA), and theoretically no tax upon withdrawal -- if it is truly mirroring the US tax treatment of a Roth 401(k).

But would this still be the case if the taxpayer makes contributions to a Roth 401(k) whilst Canadian resident? Would that jeopardize the Canadian tax treatment upon withdrawal, assuming the taxpayer is Canadian resident at the time?

I've looked at the folio (S5-F3-C1) but still unclear on that last point.

Would very much appreciate anyone with insight on this issue chime in. Thanks!

[nelsona]

Since CRA has made this interpretation, I don't see how "forced" Roth401(k) contributions could be considered any different that "normal" elected Roth401(K) distributions.
However, I would be careful, in light of the last 3 paragraphs of the folio, that there appears to be a distinction between elected contributions and non-elected.

[Taxman23]

Thank you for the reply, very helpful.

I see your point. There is a reference in 1.27 of the folio to filing an election when no employer contributions are made. Despite the fact 1.28 clarifies that the entire plan would be an EBP so long as the employer contributes to the regular 401(k), there is still concern given CRA's mention of elections for certain arrangements to avoid current taxation.

Unfortunately CRA provides no clarity around the timing of the Roth 401(k) contributions (whether as resident or NR), so it may be best to avoid Cdn resident contributions altogether unless CRA has explicitly noted it wouldn't give rise to taxation (which they have not that I can find).

Thanks

[nelsona]

Well, since 401(k) is treated as a pension, and contributions made to the Roth "feature" while Cdn resident are ignored, then the taxation part will be as any other pension: what is not taxed in US cannot be taxed in Canada.