Tax Article - Roth Contributions to 401(k) Accounts

Roth contributions will allow employees to designate part or all of their 401(k) employee deferrals on an after-tax basis, in which case the later distribution of those amounts plus earnings thereon will be tax-free. Although Roth contributions are not effective until tax years beginning after 12/31/05, many plan sponsors may want to amend their plans and establish procedures for administering these accounts. Therefore, proposed revisions have been issued to Reg. 1.401(k)-1(f) (see REG-152354-04) that define designated Roth contributions and provide special rules for such contributions. Releasing the proposed regulations now will enable the Treasury Dept. to finalize the rules in time for plan sponsors to "implement this valuable retirement savings opportunity beginning in 2006." Similar rules will apply to Roth contributions available under 403(b) plans sponsored by tax exempt organizations and public schools. 

Contact Feeley & Driscoll to discuss how these plans can benefit employees and the IRS requirements relating to these plans. Email us or call us at 1 (888) 875-9770.

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