Roth 401(k) distributions.Proposed regulations (REG-146459-05) provide further guidance and clarification on the taxation of distributions from designated Roth accounts under Sec. 401(k) and 403(b) plans. (For a discussion of the proposed regulations 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, see News Notes, Laffie, "Roth 401 (k)s," TTA TTA Telecommunications Technology Association (Korea) TTA Teacher Training Agency (UK) TTA Triangle Transit Authority (Raleigh/Chapel Hill/Durham, North Carolina, USA) , March 2006, p. 133.) Designated Roth contributions allow employees to 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. all or a portion of their elective contributions under a Sec. 401(k) or 403(b) annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. plan as Roth contributions. These contributions would receive tax treatment much like Roth IRA Roth IRA An individual retirement plan that bears many similarities to the Traditional IRA. Contributions are never deductible, and qualified distributions are tax-free. A qualified distribution is one that is taken at least five years after the taxpayer established his/her first contributions (i.e., they would be contributed from after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. income but later, "qualifying distributions" of the contributions plus earnings would be completely tax-free). To be a qualified Roth distribution, the amount must meet certain requirements, which include having been held for five years and having been made after the participant reaches age 59 1/2, dies or becomes disabled. Roth distributions can only be rolled over to other Roth plans or IRAs. If a distribution is not qualified, under Sec. 72 the distribution would be included in the distributee's gross income, to the extent allocable al·lo·ca·ble adj. Capable of being allocated. Adj. 1. allocable - capable of being distributed allocatable, apportionable distributive - serving to distribute or allot or disperse to income on the contract, and excluded from gross income to the extent allocable to investment in the contract (basis). The amount of a distribution allocable to investment in the contract is determined by applying the ratio of the investment in the contract to the account balance to the distribution. Note: this treatment differs from the taxation of nonqualified distributions from Roth IRAs, in which nonqualified distributions are treated as a return of contributions (and thus not includible in gross income) until all contributions have been returned as basis. Separate accounting: Under Sec. 402A(b) (2) (A) and (B), separate "designated Roth accounts" must be established, and separate recordkeeping must be maintained for each account. Under the proposed regulations, these reporting and recordkeeping requirements will not become effective until tax years beginning after 2006. This delay gives plans sufficient time to develop systems to comply with these reporting requirements. |
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