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Roth 401(k) Plans and Roth 403(b) Plans
By Joe Rankin & Bruce Delbecq
Employee Benefits Alert, November 2005
Opportunity
Bginning January 1, 2006, plan sponsors will have the option of implementing a Roth 401(k) or 403(b) plan or adding these Roth features to an existing 401(k) or 403(b) retirement plan.
Description
A Roth 401(k) or 403(b) allows participants the option of making all or a portion of their deferrals on an after-tax basis and benefiting from tax-free distributions at retirement. The administrative complications and the participant education requirements may be overwhelming.
Action
Employers should review 401(k) retirement plans now to determine whether this option will be beneficial for employees in 2006.
If an existing plan sponsor chooses to allow Roth 401(k) deferrals on January 1, 2006, it’s expected that the plan must adopt an amendment by the end of the first plan year ending after such date (e.g., December 31, 2006 for a calendar year plan).
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