FIS Relius
Roth 401(k) Update 10/5/2005
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In a prior technical update, we indicated that we are waiting on IRS guidance regarding interim plan amendment requirements for Roth deferral provisions, the final 401(k)/401(m) regulations and the proposed 415 regulations. The IRS still has not provided any additional guidance on these items. However, IRS Notice 2001-42 and Revenue Procedure 2005-66 are consistent with respect to the timing of an amendment to add Roth deferral provisions to a 401(k) plan. Under that guidance, an amendment to implement a voluntary provision is required by the last day of the plan year in which the provision is effective with respect to the plan. This means that if a plan permits Roth 401(k) deferrals on January 1, 2006, then an amendment is needed by the end of the first plan year ending after such date (e.g., December 31, 2006 for a calendar year plan).

We realize that many practitioners want the Roth amendment as soon as possible, so we are currently drafting a good-faith Roth amendment for use with all of our plans. We expect to release this amendment by the end of October and will notify you when it is available. In addition, we will be posting sample deferral election forms and ADP/ACP safe harbor notices to our Web site.

As part of the process of drafting the amendment, numerous issues have arisen regarding how much design flexibility should be incorporated into in such an amendment. We would appreciate your completion of a very short survey regarding Roth 401(k) contributions. A link is provided at the end of this e-mail.

Please note that there is a possibility another interim amendment may be needed to implement the final 401(k)/(m) regulations, as well as the post-severance compensation provisions of the proposed 415 regulations. In addition, there is also the possibility (but it is looking much more remote) that the IRS may develop its own good-faith or model Roth 401(k) amendment. Nevertheless, we understand that many practitioners want the Roth 401(k) amendment now, which is why we will be releasing our good-faith amendment without waiting to see whether the IRS will issue clarifying guidance.

Take our Roth 401(k) Survey here.