Can You Get a 401(k) With an ITIN Number?

Retirement savings are a key part of financial security in the United States, helping individuals build a nest egg for their later years. Many people inquire about eligibility for common retirement plans, especially those with an Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number (SSN).

Understanding the Individual Taxpayer Identification Number

An Individual Taxpayer Identification Number (ITIN) is a nine-digit tax processing number issued by the Internal Revenue Service (IRS). It is for individuals who need a U.S. taxpayer identification number for federal tax purposes but are not eligible for a Social Security Number (SSN). The ITIN allows them to comply with U.S. tax laws.

ITINs are used by various individuals, including nonresident aliens required to file U.S. tax returns, resident aliens based on the substantial presence test who do not qualify for an SSN, and dependents or spouses of U.S. citizens or resident aliens. The number always begins with the number “9” and is formatted similarly to an SSN (9XX-XX-XXXX). It serves solely for tax reporting purposes and does not authorize employment in the U.S., nor does it provide eligibility for Social Security benefits or alter immigration status.

Understanding the 401(k) Plan

A 401(k) plan is an employer-sponsored retirement savings program. Named after a section of the U.S. Internal Revenue Code, it allows participants to contribute a portion of their wages, often on a pre-tax basis, directly from their paychecks. These contributions and any investment earnings typically grow tax-deferred until withdrawal in retirement.

Many employers offer 401(k) plans as part of their benefits packages, and some may provide matching contributions, which can significantly boost savings. Funds within a 401(k) are invested in various options, such as mutual funds, chosen by the employee from a menu provided by the plan administrator. Eligibility often includes being at least 21 years old and completing a certain period of service, such as one year with the employer.

ITIN Holders and 401(k) Eligibility

The Internal Revenue Service (IRS) does not explicitly prohibit individuals with an Individual Taxpayer Identification Number (ITIN) from participating in 401(k) plans. From a federal tax perspective, an ITIN fulfills the requirement for a taxpayer identification number for income reporting, necessary for both contributions and distributions from retirement accounts.

Despite this, individuals with ITINs often encounter practical challenges when attempting to enroll in employer-sponsored 401(k) plans. Most payroll and 401(k) recordkeeping systems are designed for Social Security Numbers (SSNs). These systems typically require an SSN for employee identification, tax withholding calculations, and generating necessary tax forms like Form W-2 and Form 1099-R.

The administrative hurdles stem largely from system limitations rather than legal prohibitions against ITIN holders. Employers often rely on automated systems not configured to process ITINs for 401(k) enrollment and administration. This can lead to employers requiring an SSN for plan participation due to the complexities and costs of modifying their existing infrastructure.

Alternative Retirement Savings Options

Given the challenges in accessing employer-sponsored 401(k) plans, individuals with an ITIN have other viable retirement savings avenues. Individual Retirement Arrangements (IRAs) are accessible options. Both Traditional and Roth IRAs permit contributions from individuals with an ITIN, provided they have U.S. earned income.

Traditional IRAs allow pre-tax contributions, which can reduce current taxable income, with taxes paid upon withdrawal in retirement. Roth IRAs, conversely, are funded with after-tax dollars, meaning qualified withdrawals in retirement are tax-free. The annual contribution limits for IRAs apply regardless of whether an SSN or ITIN is used, which for 2024 is $7,000, with an additional catch-up contribution of $1,000 for those age 50 and over.

For ITIN holders who are self-employed, specialized retirement plans like Simplified Employee Pension (SEP) IRAs or Savings Incentive Match Plan for Employees (SIMPLE) IRAs offer ways to save. These plans allow for higher contribution limits than traditional or Roth IRAs. Beyond tax-advantaged accounts, taxable brokerage accounts provide a flexible savings option for long-term goals. While not offering the same tax benefits as retirement accounts, they allow for investment growth and can be opened with an ITIN.