With respect to after-tax contributions to a 401(k), does the IRS preclude the use of severance pay to make after tax contributions to a 401(k)?

As long as an employee’s total contributions to his 401K in a single year do not exceed $50,000 or 100% of your compensation, does the IRS prohibit an employee from putting his severance pay into his 401(k) when he retires as an after-tax contribution?

Generally, severance pay is made to employees after they leave the company they work for. True severance pay or “parachute payments” are not considered compensation for purposes of making 401(k) contributions.

Are non-cash RMDs permitted for Inherited IRAs that are already in distribution due to the age of the deceased? The beneficiary is age 60.

Non-cash distributions can be made to a beneficiary of an inherited IRA to satisfy the RMD for the year regardless of when the decedent died or the age of the beneficiary.

Can an after-tax 401(k) be rolled over to a Roth IRA ?

Yes. All 401(k) funds can be converted to a Roth IRA. However, the pro-rata tax rule will generally apply. 

Have a question for Ed Slott? Please send your mailbag questions to mailbag@irahelp.com.

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