The GE Retirement Savings Plan (RSP) is not an average 401k. While there are certainly more robust 401ks, the RSP has several buried opportunities that are unusual for their category. An example of this is the contribution options available – salary deferrals, Roth, and after-tax are a few. Below, I will break down the RSP contribution options and uncover one of the hidden opportunities.
Pre-tax contributions are the most popular method for saving in the RSP. Pre-tax contributions are salary deferrals. This means that the amount you contribute to this bucket in your RSP is not taxed in the year you earn it. Instead, the contributions grow tax-deferred and are only taxed when withdrawn from the plan. These contributions can only be withdrawn by employees who are over age 55 or separated from the company. Additionally, these funds can be rolled over to an IRA (a nontaxable event if done correctly) after age 59.5 or upon separation of employment.
The company match is the amount GE contributes to your RSP in addition to what you contribute. Often referred to as “free money”, GE matches 50% of employee contributions up to 8%. Therefore, if you contribute 8% you will receive all 4% in matching contributions from GE. Just like the pre-tax contributions, this money is not taxed when you ‘earn’ it. It is only taxed on withdrawal. Unlike the employee contributions, the employer match can be rolled over to an IRA at any time and is not subject to an age restriction.
Company Retirement Contributions, or CRCs, are a relatively new contribution type in the RSP. CRCs were announced in the wake of the pension freeze. The CRC is an additional 3% that GE will contribute to employee’s RSPs who are on payroll as of December 15 th . The contribution is made the following January – even for those who retire or separate as of January 1 st . Unlike other contributions, the CRC is subject to unique vesting requirements, but many GE employees will fully vest automatically.
This is where things start to get interesting. Generally, there are two types of after-tax contributions in the RSP – pre-87 (contributions were made prior to 1987) and post-86 (contributions made after 1986). After-tax contributions to the RSP can be rolled over to a Roth IRA, but the earnings on those contributions are pre-tax and can only be moved to a Traditional IRA. Generally, this makes after-tax contributions less favorable compared to Roth contributions that grow tax-free. However, the after-tax option in the RSP is a tremendous benefit for those who want to contribute more than the annual contribution limit. While pre-tax and Roth contributions are subject to a $22,500 annual limit (with a $7,500 catch up for those over age 50), after-tax contributions can be made beyond this. After-tax contributions can be made to the RSP with a total limit of $66,000. Below is a table breaking this down:
| 2023 Annual 401(k) Contribution Limits | ||
| Under age 50 | Over age 50 | |
| Pre-Tax / Roth | $22,500 | $22,500 |
| Catch-up | – | $7,500 |
| After-Tax / Spillover | $43,500 | $43,500 |
| Total Potential Contributions | $66,000 | $73,500 |
Here’s a huge opportunity for after-tax money – it can be rolled over to a Roth IRA at any point as it is not subject to an age restriction. This plan provision has been termed the “super Roth” or the “super back-door Roth” as it allows high income earners – who would otherwise be ineligible to contribute – to save money into a Roth. To take full advantage of this, it is critical that after-tax money in the RSP is rolled over to a Roth IRA every year. Otherwise, the growth on the after-tax funds in the plan will be taxable upon withdrawal.
Fidelity’s website provides the source information for your RSP. Below is a hypothetical example of what that looks like along with a description of each category.
| Sources | Allocation | Current Balance ($) | Vested Balance ($) | Vested (%) | Description |
| PRE-TAX CONTRIBUTIONS | 63.94% | $984,569.12 | $984,569.12 | 100% | The amount of pre-tax contributions made by the employee, plus growth on those contributions |
| COMPANY MATCH | 27.35% | $421,056.36 | $421,056.36 | 100% | The amount of company match received, plus growth on those contributions. Rollover eligible at any time. |
| AFTER TAX | 7.18% | $110,569.35 | $110,569.35 | 100% | The amount of after-tax contributions made post-1986 that were matched, plus the growth on those contributions. |
| AFTER TAX (UNMATCHED) | 0.94% | $14,542.35 | $14,542.35 | 100% | The amount of after-tax contributions made post-1986 that were not matched, plus the growth on those contributions. |
| CO. RETIREMENT CONTRIBUTION | 0.31% | $4,756.89 | $4,756.89 | 100% | The amount of Company Retirement Contributions made by GE, plus the growth on those contributions |
| PRE 87 AFTER TAX | 0.28% | $4,258.85 | $4,258.85 | 100% | The amount of after-tax contributions made prior to 1987, plus the growth on those contributions |
| 100% | $1,539,752.92 | $1,539,752.92 |
| Source | Contributions | Description |
| Post-86 After Tax | $57,095.56 | The total amount contributed to after-tax by the employee, not including the growth. Eligible to be rolled to a Roth IRA. |
Which contribution option is right for you?
As is often the case with personal financial decisions, it depends. There are many different factors to consider when deciding what type of contributions to make in the RSP. Your personal tax situation, financial goals, and how much you want to contribute are just some of those considerations. Its critical to ensure that you are taking full advantage of all the options available in the RSP.
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Zach is a Principal in the Cincinnati North office where he provides comprehensive financial planning and investment management services to private. Read more
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Please read important disclosures here.
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