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5WASHINGTON – On Dec. 30, 2005, the Treasury Department and the IRS issued final regulations regarding sections 401(k) related to designated Roth contributions. Designated Roth contributions allow for employees to designate all or a portion of their section 401(k) employee deferrals as Roth contributions, which would receive treatment much like a Roth individual retirement account contribution where they would be contributed on an after-tax basis, but qualified distributions of those contributions, plus earnings, would be tax-free. Roth contributions were added to the Internal Revenue Code by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and are effective for taxable years beginning after Dec. 31, 2005. These regulations finalize rules that were proposed on March 2, 2005. Plan sponsors desiring to offer employees the opportunity to make designated Roth contributions will find these regulations “useful in designing their plans to accept such contributions,” both agencies said. Further rules, largely focusing on the tax treatment of distributions of designated Roth contributions, will be issued in proposed form in the near future, according to both agencies. [email protected]

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