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WASHINGTON – The Treasury Department and IRS recently issued a number of proposed rules and definitions for designated Roth accounts that complements final rules that were made effective Jan. 3. The proposal deals with what defines a qualified distribution, rules for Roth contributions and taxation of distributions of that are not qualified, as well as rules for Roth contributions under section 403(b) plans. The proposal also outlines the coordination of designated Roth contributions and Roth IRAs. A designated Roth contribution is an elective deferral to a section 401(k) or 403(b) plan that has been designated by an employee that is not excludable from the employee’s gross income. Designated Roth contributions must be maintained by the plan in a separate account. The Jan. 26 proposal piggybacks final rules made by Treasury and IRS on Jan. 3, which issued guidance for designated Roth contribution requirements under qualified cash or deferred arrangements described in section 401(k). These most recent proposals would affect administrators of, employers maintaining, participants in, and beneficiaries of section 401(k) and section 403(b) plans, as well as owners and beneficiaries of Roth IRAs and trustees of Roth IRAs. Comments are due on the proposed rules by April 26.

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