Roth 401(k) Information

401(k) Plans

If offered by your employer's plan, you are eligible to make Roth 401(k) deferrals to your account. These deferrals are made on an after-tax basis and all Roth assets (Roth contributions and associated earnings) can be withdrawn completely tax-free if certain criteria are met (see "Qualified Distributions" below).

What are the Benefits of making Roth contributions?

Qualified distributions of Roth assets (contributions and associated earnings) are completely tax-free.
Tax diversification. Your future circumstances are difficult to predict, and having both pre-tax assets and Roth assets available in retirement can allow you to choose the source of funds that is most advantageous to you at the time of the distribution.

While Roth 401(k) contributions are similar in many respects to Roth IRA contributions, they differ in some important ways, such as:

Higher contribution limits. 401(k) plans allow for larger after-tax savings.
No income limits. Unlike Roth IRAs, you are eligible to make Roth 401(k) contributions regardless of how much income you make.
Distribution rules. While Roth IRA assets can generally be withdrawn at any time, you can only withdraw funds from your 401(k) plan when permitted by the plan (see 401(k) Withdrawal Information for additional details).
- Roth 401(k) assets are subject to required minimum distribution rules while Roth IRAs are not.

How do I know if Roth deferrals or regular pre-tax deferrals will be better for me?

Use the Roth 401(k) Analyzer to help determine whether Roth deferrals or pre-tax deferrals will be more advantageous.

Roth 401(k) Deferrals

If your 401(k) plan permits Roth deferrals, you can use the deferral change form for your plan to begin making Roth contributions. This form can be obtained by contacting ICMA-RC at 800-669-7400.

Roth deferrals are made on an after-tax basis. You can contribute any combination of Roth deferrals and regular pre-tax deferrals up to the 401(k) contribution limit in effect for the year.

Note to Participants in a 401(k) Plan and a Roth IRA:
Making Roth contributions to your 401(k) plan does not reduce the amount you are eligible to contribute to a Roth IRA on an annual basis. You are eligible to contribute the maximum amount to both plans.

Qualified Distributions

In order for Roth deferrals and associated earnings to be withdrawn completely tax-free, the requirements for a qualified distribution must be met. Distributions of Roth assets are qualified if:

A period of five (5) taxable years has passed since your first Roth deferral. Note that the date of your first Roth deferral is calculated as January 1 of the year in which your first Roth deferral was made, regardless of the actual date during the year that the deferral was made.
And at least one of the following also applies:
- The distribution is made on or after the date you attain age 59½,
- The distribution is made to your beneficiary(ies) in the event of your death, or
- You are permanently disabled.

If you take a distribution of Roth assets from your account, and the above requirements for a qualified distribution are not met, the earnings portion of the distribution will be taxable and may also be subject to an early withdrawal penalty.

When can I withdraw Roth assets from my account?

The same eligibility requirements that apply to other distributions from your 401(k) account also apply to Roth 401(k) assets. See 401(k) Withdrawal Information for additional details.

For additional information, please contact Investor Services at 800-669-7400.