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April 25, 2006
IRS Provides Sample Plan Amendment for Roth 401(k)

The IRS has published a sample plan amendment for 401(k) plan sponsors who want to provide for designated Roth contributions in their 401(k) plans.

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The IRS says the sample amendment will help those plan sponsors comply with the requirement for timely adoption of a discretionary amendment by the end of the plan year in which the amendment is effective.

The new option for a Roth 401(k) was added to the Internal Revenue Code by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and is effective for taxable years beginning after December 31, 2005. 

Designated Roth contributions allow for employees to designate all or a portion of their 401(k) employee deferrals as Roth contributions, which would receive treatment much like a Roth IRA contribution (that is, they would be contributed on an after tax basis, but qualified distributions of those contributions, plus earnings, would be tax-free).

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