ICMA-RC to Offer Roth 401(k) Feature

January 06, 2009

ICMA-RC today announced it is now offering a Roth 401(k) feature to its existing 401(k) clients.

The Roth 401(k) feature is a retirement savings option designed to provide employees with an opportunity to invest additional after-tax dollars with the potential for tax-free withdrawals. Participants can designate a percentage (or all) of their deferrals to their 401(k) plan as Roth deferrals. Roth 401(k) deferrals and associated earnings can later be withdrawn tax-free if the distribution is "qualified".

In order for the distribution to be qualified, five years must have passed since the participant’s first Roth deferral, and the participant must be aged 59½ or older, disabled or deceased. While Roth 401(k) deferrals are similar to Roth IRA contributions, Roth 401(k) deferrals offer additional benefits, including:

• Higher contribution limits: The maximum elective deferral to a 401(k) plan is $15,500 in 2008 and will increase to $16,500 in 2009.
• No income limits: All participants are eligible to make Roth 401(k) deferrals whereas highly compensated individuals may be ineligible to contribute to a Roth IRA.
• Additional after-tax savings: Participants can contribute the maximum amount to both a 401(k) plan and a Roth IRA.

Before participants can make Roth 401(k) deferrals, their plan sponsor must agree to offer the feature through a plan amendment.

For more information regarding offering the Roth 401(k) feature, ICMA-RC’s 401(k) plan sponsors should contact their Client Services Team representative at 800-326-7272.