A designated Roth account is a separate account in a 401(k) or 403(b) plan to which designated Roth contributions are made. Designated Roth contributions are not excluded from gross income and are currently taxed. Qualified distributions from a Roth account, including earnings, are excluded from gross income.
The plan must separately account for contributions, gains and losses to this account.
An eligible employee can designate all or a portion of his or her elective salary deferrals as after-tax Roth contributions. The amount an employee may designate as a Roth contribution is limited to the maximum amount of elective deferrals for the year ($17,500 in 2013 and 2014; $23,000 in 2013 and 2014 if age 50 or over) less the total amount of the employee's elective deferrals not designated as Roth contributions.
A qualified distribution of designated Roth contributions is excludable from gross income. A qualified distribution is one that is made at least five years after the year of the participant’s first designated Roth contribution (counting the first year as part of the five) and is made:
- On or after attainment of age 59½,
- On account of the participant’s disability, or
- On or after the participant’s death.
- Designated Roth Accounts
- Retirement Plans FAQs regarding Designated Roth Accounts
- Publication 4530, Designated Roth Accounts under 401(k) or 403(b) Plan
- Comparison Chart