Another Retirement Savings Option: Roth 401(k) Plan - Feb 22

[roth401k]

Another Retirement Savings Option: Roth 401(k) Plan

by John E. Buckley
Economist, Division of Compensation Data Analysis and Planning, Bureau of Labor Statistics.
Telephone: (202) 691-6299; E-mail: Buckley.John@bls.gov
Bureau of Labor Statistics
Originally Posted: February 22, 2006

Employers now have a new retirement savings plan to offer their employees--the Roth 401(k) plan, which combines features of Roth IRAs and traditional 401(k) plans.
Beginning January 1, 2006, employers have a new retirement savings option to offer employees. The plan, commonly referred to as a "Roth 401(k)," is a hybrid that combines features of Roth IRA and traditional 401(k) plans but differs in important aspects. Some of the differences and similarities are outlined in the exhibit.

Employees who already have a regular 401(k) plan can participate in a Roth 401(k) if the employer offers it. However, the combined total contributions cannot exceed the Internal Revenue Service limit set for individual plans--that is, $15,000 (or $20,000 for employees aged 50 or over) in 2006. An employee who participates in both plans can designate the amount to be applied to each plan. Once a decision is made, the participant cannot switch money among the plans. (Roth 401(k) participants who change employers can roll over the proceeds into a Roth IRA.)

If an employer provides a matching contribution to a Roth 401(k), two accounts.............

ENTIRE ARTICLE HERE