Roth 401(k)s, More Flexible......June 23, 2005

[roth401k]

United States: Roth 401(k)s, More Flexible Spending Accounts, and Safer IRAs
23 June 2005
Article by Thea Chester, Thomas Reicher, David Walsh and Thomas Welk
Roth 401(k) Contributions


One provision of the Economic Growth and Tax Relief Reconciliation Act of 2001 ("EGTRRA") that had a delayed implementation date is the provision for Roth 401(k) contributions. (Technically, Roth contributions may be made to 403(b) annuity plans as well. In the remainder of this Alert, however, we will refer only to the far more widespread 401(k) plans.) The Internal Revenue Service ("IRS") recently issued proposed regulations addressing Roth 401(k) contributions, which are scheduled to become effective January 1, 2006, for calendar year plans.

A Roth 401(k) contribution is an after-tax elective contribution made by a participant to a 401(k) plan. The participant may irrevocably designate part or all of such 401(k) elective contribution as a taxable Roth 401(k) contribution. The employee will be taxed on the Roth 401(k) contribution in the year the elective deferral is made. The Roth 401(k) contribution grows tax-free in the plan and......................

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