June 2006

New Business

Sample plan amendment for Roth 401(k)s now available

6/1/2006 -

This year employers can offer a Roth option within their 40l(k) plans. The IRS recently issued a sample plan amendment providing language employers can use to amend their existing 40l(k)s to allow employees to designate their contributions as Roth contributions.

Why offer the Roth option in your company’s 401(k)? The big advantage to a Roth is that, though contributions are not tax-deductible, qualifying distributions are completely tax-free. Regular 40l(k) contributions are deductible, but distributions are subject to tax as ordinary income. A Roth 40l(k) has an advantage over a Roth IRA, too: the contribution limit is much higher - $15,000 for the Roth 40l(k) compared to $4,000 for the Roth IRA ($20,000 and $5,000 for those aged 50 or older).

If you would like to discuss offering this retirement savings option to your employees, give us a call.