Roth 401(K)—IRS Issues Guidance On Distributions, Rollovers And Plan Amendments

The U.S. Internal Revenue Service (IRS) recently issued two new pieces of guidance regarding Roth 401(k) contributions under 401(k) plans. First, the IRS issued proposed regulations on the treatment of rollovers of Roth 401(k) distributions and on the taxation and reporting of distributions from Roth 401(k) accounts. The proposed regulations address many of the unanswered questions regarding distributions from Roth 401(k) accounts, including how to measure the five-year participation requirement for qualified distributions and how non-qualified distributions will be taxed. Second, the IRS issued a sample plan amendment regarding Roth 401(k) contributions (to be adopted by the end of the plan year in which the contributions are first available).