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Workers who opt for their employer’ s Roth may be in for an unwelcome surprise. By Ben Mattlin

Richard Pon, a CPA and certified financial planner in San Francisco.

The tax rule is fairly new. The SECURE 2.0 Act, passed at the end of 2022, gave employees the option of electing their company’ s Roth 401( k) not just for their own contributions but also for their employer’ s matching contributions. And to the IRS, those employer additions to a Roth 401( k) count as extra compensation to the employee— that is, taxable income, reported on Form 1099-R.

Not all employers give their employees this option, says Pon, and they are not required to. The tax is only on those who did receive matching Roth 401( k) contributions from their employer. But that number may be growing, he says.

Many retirement experts have been pounding the table on Roth 401( k) s almost since they became available in 2006( eight years after Roth IRAs were introduced). Roths have many advantages. Like traditional retirement accounts, they can grow tax-free. But Roths also allow for tax-free withdrawals, while regular retirement accounts don’ t.( Contributions can be withdrawn anytime; fund earnings can only come out penalty-free after the account holder turns 59½ and has owned the account for at least five years.) Roths are also exempt from required minimum distributions— the taxable withdrawals that are mandatory from regular retirement accounts once the account holder turns 73.

Roths are considered so crucial to retirement and tax planning that a growing number of clients have already converted their old retirement accounts into them. Such conversions, sometimes called rollovers, end up triggering additional income taxes. But clients who figure that their tax rate will be higher in retirement are happy

48 | FINANCIAL ADVISOR MAGAZINE | SEPTEMBER / OCTOBER 2026 WWW. FA-MAG. COM