Coming Soon . . . The Roth 401(k)
February 24, 2005This article was originally published on April 11, 2005 in Pension & Benefits Week. © 2005 by RIA.
The 401(k) plan is the most popular type of employer-sponsored retirement plan. The Bush administration has proposed replacing the myriad of individual account retirement plans – 401(k)s, 403(b)s, and 457(b)s – with a single type of individual savings account – the employer retirement savings account. The ERSA would be an after-tax, Roth IRA-style account, where participants could elect to contribute up to $15,000 year on an after-tax basis. All contributions would grow with earnings and could be distributed at a later date without being subject to any further federal income tax. However, what is often overlooked is that the tax Code is already scheduled to provide an ERSA-style account as of January 1, 2006. This January 1, 2006, account is the Roth 401(k) account.
