Roth 401(k)s.The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. has issued final regulations (TD 9237, 1/3/06) on designating elective elective non-urgent; at an elected time, e.g. of surgery. elective adjective Referring to that which is planned or undertaken by choice and without urgency, as in elective surgery, see there noun Graduate education noun contributions to a Sec. 401(k) plan as Roth contributions. Employees who participate in a Sec. 401(k) plan can choose to make elective contributions. Such contributions are generally not included in gross income when contributed ("pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta elective contributions"). As of Jan. 1, 2006, employees who make elective contributions to a Sec. 401(k) plan can designate des·ig·nate tr.v. des·ig·nat·ed, des·ig·nat·ing, des·ig·nates 1. To indicate or specify; point out. 2. To give a name or title to; characterize. 3. some or all of these contributions as Roth contributions. Designated Roth contributions are elective contributions, but not pre-tax elective contributions, because designated Roth contributions are includible in gross income when contributed. However, when designated Roth contributions are later distributed, any qualified distributions are excludible from the recipient's gross income. The regulations clarify (company) Clarify - A software vendor, specialising in Customer Relationship Management software. Nortel Networks sold Clarify to Amdocs in 2002. http://amdocsclarify.com/. that, to provide for designated Roth contributions, a qualified cash or deferred arrangement (CODA (1) A distributed file system developed at Carnegie Mellon University in the late 1980s. Evolving from the Andrews File System, Coda is noted for its ability to withstand network failures. See AFS. (2) A software company based in the U.K. ) must also offer pre-tax elective contributions. Definition: The final regulations define a designated Roth contribution as an elective contribution under a qualified CODA that is (1) designated irrevocably ir·rev·o·ca·ble adj. Impossible to retract or revoke: an irrevocable decision. ir·rev by the employee at the time of the cash or deferred election as a designated Roth contribution; (2) treated by the employer as includible in the employee's income at the time the employee would have received the amount in cash if he or she had not made the cash or deferred election; and (3) maintained by the plan in a separate account. Contributions are treated as designated Roth contributions under the regulations to the extent permitted under the plan. In addition, designated Roth contributions must satisfy the basic requirements for elective contributions made under a qualified CODA. This includes the nonforfeitability requirements and the restrictions on distributions described in Regs. Sec. 1.401(k)-1(c) and (d). Separate accounting required: Under the final regulations, designated Roth contributions must be placed in a separate account. Thus, contributions and withdrawals of designated Roth contributions are credited and debited to a designated Roth contribution account. The account is maintained for the employee who made the designation DESIGNATION, wills. The expression used by a testator, instead of the name of the person or the thing he is desirous to name; for example, a legacy to. the eldest son of such a person, would be a designation of the legatee. Vide 1 Rop. Leg. ch. 2. 2. , and the plan must maintain a record of the employee's investment. Gains, losses and other credits or charges are separately allocated on a reasonable and consistent basis to the designated Roth contribution account and other accounts under the plan. Forfeitures are not allocated to that account. Effective date: Sec. 402A, which allows employees to treat elective contributions to a Sec. 401(k) plan as designated Roth contributions to the extent allowed by the plan, is effective for tax years beginning after 2005. The final regulations generally apply to plan years beginning after 2005. |
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