Deciding If a Roth 401(k) Is Right for Your Plan
Designated Roth contributions are after‑tax; qualified distributions (including earnings) are tax‑free if conditions are met. Plans must account separately for Roth amounts.
How Roth Works
Designated Roth contributions are after‑tax; qualified distributions (including earnings) are tax‑free if conditions are met. Plans must account separately for Roth amounts.
Who May Benefit
Younger workers expecting higher future tax rates
Employees seeking tax diversification
Participants maximizing pre‑tax already and adding Roth for flexibility
Design and Education
Amend the plan to add Roth if absent; update payroll and educate employees on differences vs. pre‑tax deferrals.
Plan Sponsor Action Checklist
Checklist
Confirm your plan permits Roth and that payroll codes are mapped.
Checklist
Add a simple Roth vs. pre‑tax explainer to enrollment kits.
Checklist
Track distributions carefully to preserve ‘qualified’ status.
Talk to our team
References
- IRS Designated Roth Account topic and FAQs.