Roth 401(k) Proposed Rules - March 2, 2005

[roth401k]

Full Article Here:
http://www.faegre.com/articles/article_1544.aspx


IRS Proposes Regulations for Roth 401(k) Programs Starting in 2006

The 2002 tax law (known as "EGTRRA") included a provision allowing qualified 401(k) plans and 403(b) plans to permit participants to designate some or all of their contributions as "Roth contributions" for plan years beginning in 2006 or later. The IRS recently published its first round of guidance on Roth contributions. (The IRS only addressed Roth 401(k) contributions, so the rest of this Alert will not discuss 403(b) plans.) We expect that this is going to cause many employers to begin exploring the issues that would be involved in adding a Roth contribution feature to their plans. Note, however, that plans are not required to allow participants to designate their contributions as Roth contributions.

Unlike regular pre-tax 401(k) contributions, a Roth contribution is an "after-tax" contribution that will be taxed to the participant at the time it is deducted from his or her pay. However, if the Roth contributions, and the accumulated earnings on them, are distributed after age 59 1/2, or due to death or disability, they will be exempt from tax, provided the distribution occurs at least 5 years after the participant began making Roth contributions.

To be Roth contributions, elective 401(k) contributions will have to meet all of the following requirements: ......................


Full Rules Here:
http://www.regulations.gov/fredpdfs/05-04020.pdf