FIS Relius
Roth - 401(k) and 403(b) 3/22/2005
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When Congress enacted “Roth 401(k)” and “Roth 403(b)” provisions in 2001 as part of the EGTRRA legislation, practitioners gave little notice because the 2006 effective date of the provisions seemed an eternity away. Now, however, these Roth contribution provisions, will be effective in less than nine months. The new provisions will permit a 401(k) plan or a 403(b) plan to receive after-tax contributions whose earnings, like Roth IRA contributions, will be non-taxable upon distribution. However, Roth deferral contributions are subject to most of the qualified plan rules that apply to pre-tax elective deferrals. The IRS just issued proposed regulations on Roth 401(k) plans to provide initial guidance. Many questions remain regarding what may be a very popular retirement plan feature.

We have prepared two charts, one which compares the characteristics of “traditional” 401(k) plans with Roth 401(k) plans, and one which similarly compares “traditional” and Roth 403(b) plans. Both may be downloaded from our FTP site.

We will discuss the Roth 401(k) and 403(b) issues in several seminars this year. Both the 401(k) Plan Workshop, beginning in mid-April 2005, and the 403(b) Plan Workshop currently being held in a limited number of cities, include segments on the Roth design.

We are also presenting a Web seminar on Tuesday, March 29, 2005, covering the Roth 401(k) proposed regulations.