Designated Roth Accounts - Contributing to a Designated Roth Account


Employers may offer employees an opportunity to make after-tax salary deferral contributions to a separate designated Roth account in the employer’s 401(k), 403(b) or governmental 457(b) retirement plan. Unlike pre-tax elective deferrals, the amount employees contribute to a designated Roth account is includible in gross income. However, distributions from the account are generally tax-free, including previously untaxed earnings in the account. (See which qualified distributions are tax-exempt).

Benefits of designated Roth accounts

Compared to a Roth IRA, designated Roth accounts:

  • Offer larger annual contribution limits than Roth IRAs,
  • Are not subject to the modified gross income limitations that restrict some individuals from contributing to Roth IRAs, and
  • Allow participants to keep their Roth and pre-tax savings within a single plan.

See our Roth Comparison Chart and Ten Differences between a Roth IRA and a Designated Roth Account for help in deciding whether to contribute to a Roth IRA, designated Roth account or pre-tax elective deferral account. Each type of account has different benefits and features.

Contribution limits

The combined amount a participant may contribute as pre-tax elective deferrals and designated Roth contributions each taxable year is limited. Total contributions to the plan are limited to $19,500 in 2020 and in 2021 ($19,000 in 2019) plus for employees age 50 or older, an additional $6,500 in 2020 and in 2021 ($6,000 in 2015 - 2019). For later years, the limits are subject to cost-of-living adjustments.

Allocating elective deferrals between Roth and pre-tax accounts

Participants may contribute to both a designated Roth account and a traditional pre-tax elective deferral account in their plan in the same year. They may allocate their contributions in any proportion they desire, as permitted under the terms of the plan. Total contributions to the pre-tax elective deferral and Roth accounts cannot exceed the annual contribution limit.

No recharacterizations are allowed

Once a participant contributes to a designated Roth account, the participant cannot later change the contributions to pre-tax deferrals (no “recharacterizations” are allowed).

In-plan rollovers to designated Roth accounts

Participants may be able to roll over an “eligible rollover distribution” to a designated Roth account from another account in the same plan.

Required minimum distributions start at age 72 (70 ½ if reach 70 ½ before January 1, 2020)

Designated Roth accounts are subject to the required minimum distribution rules that apply to 401(k), 403(b) and governmental 457(b) plans. In general, if the participant is retired or an owner, the participant must start receiving distributions from the plan at age 72 (70 ½ if reach 70 ½ before January 1, 2020), and annual withdrawals will be required based on his or her remaining life expectancy at the time of the withdrawal. Roth IRAs, in comparison, do not require minimum distributions at any age).

Matching contributions and forfeitures

Matching contributions and forfeitures may not be allocated to a designated Roth account. However, employers may take into account designated Roth contributions in calculating any matching contributions under the terms of the plan. These amounts must be contributed to another account in the plan.

Establish a Designated Roth Contribution Program

Designated Roth Account Distributions

In-Plan Rollovers to Designated Roth Accounts

Additional Resources for Designated Roth Accounts