Roth 401 (k) Overview:
in January 1, 06 , employees can choose to make the 401 (k) contributions, both on a pre-tax basis, or after-tax, or a combination of the two. The contribution that these limits apply to 401 (k) contributions introduced in 06 (both made pre-tax or after-tax, or both discount) are:
1. $ 15,000 under the basic limit, in addition to,
$ 2.5000 in addition to employees who are age 50 or older. Remains
employer Othe responsible for federal withholding tax income (and state tax and local income, where applicable) and any taxes applicable at the salaries after tax of (k) contribution of each employee 401.
* while no federal (or state or local, if any) and the withholding of income tax contributions before taxes, the tax will be applied to the salaries to the amounts withheld contributions before tax.
Extra oAbsent IRS guidance, and will be reported to both pre-tax and contributions after tax on the W-2 just as it is now all employees. We hope that the IRS will (before issuing W-2 Forms for the tax year 06) to provide a new law for use on W-2 Forms part of the after-tax deductible contributions.
must beoa separate records for each participant who wishes to make a Roth account 401 (k) contributions.
Ruth rules 401 (k)
to help in your decision, it is important to understand the Roth rules 401 ( k):
Hey Ruth required 401 (k) accounts that are separate accounts - can not contributions of after-tax contributions are combined with a pre-tax deduction.
Q distributions from a Roth 401 (k) will be tax-free federal income tax purposes, provided that both the holding period for a period of 5 years and a requirement event qualified to fulfill:
a) five-year holding period begins with the first any contribution 401 (k) Roth account in an employer plan.
b) qualifying events are limited strictly to age 59 1/2, death, or disability.
mayrollovers to Roth 401 (k) from another employer-sponsored Roth accounts. If you rolled to a Roth 401 (k), and start holding period for a period of 5 years with the earlier date of establishment of the carry-over account, or the date established Roth account receiving.
our booking
The following is a summary of our reservations. Please contact our office for further discussion in greater detail.
a. Should the tax issue guidance clearing up interest to determine the period of holding for five taxable on the basis of the calendar year instead of the plan year.
B requires you to charge the recipient plan plan to be responsible for keeping track of the coup eligible for contributions Roth 401 (k) plan and the time it made a contribution Ruth First would be a deterrent for the acceptance of the coup contribution Roth effectively restrict the transfer of these amounts. The participants should be responsible for keeping track of all basis in the account extension and the time it was first Roth contribution.
Jim Sponsors of plans that allow for Roth contributions should also have the ability to incorporate the provisions of the plan, which sets rules regarding order of the sources account for all types of distributions of the plan.
D. taxes must issue a sample or an interest in good faith amendments that plans sponsors may be used without affecting the reliance on letters prior report, letters of notification letters or opinion regarding the rehabilitation of the terms of their plans.
E. Sponsors of 401 (k) plans that allow Roth (k) contributions and who want to apply the automatic registration feature should be able to choose whether was a pre-tax or Roth (k) contributions will be optional default election for the participants.
F. should allow the sponsors of 401 (k) plans that allow Roth (k) contribution programs in imposing restrictions on capacity and frequency of respondents plan to choose between Roth (k) and optional pre-tax contributions to a given calendar year without violation of IRS rules.
G. and new distribution model Note that take into account the distribution of both pre-tax and appointed optional Roth contributions will be necessary. The current model is already six pages.
e. It should be a plan sponsor able to keep the plan only allows for contributions to a Roth or delay salary before tax.
final note
again, we recommend that employers and sponsors of 401 (k) plans that are considering the adoption of the provisions of Ruth seriously consider noticed reservations above. Perhaps it might be better to let others race ahead and see how they fare.
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