Publications

Roth Contributions Permitted for 401(k) and 403(b) Plans

Fall 2006
Susan E. Bernstein | Mark E. Brossman | David M. Cohen | Laurence M. Moss | Ronald E. Richman | Holly H. Weiss
Employment & Employee Benefits Developments - Fall 2006

Because Congress has made Roth 401(k) and 403(b) plans permanent, employers may now wish to consider amending their 401(k) and 403(b) plans to offer a Roth Contribution feature. Unlike traditional 401(k) or 403(b) plan contributions, Roth Contributions are made with after-tax dollars. The principal advantage of a Roth Contribution is that it results in tax-free earnings on the contributions made to the account. Although a participant pays taxes on the contributions made into the Roth account, all of the funds distributed (contributions plus earnings) are made on a tax-free basis. In a regular 401(k) or 403(b) account, the contributions and earnings are only tax-deferred and are subject to income tax at distribution.