26 U.S.C. § 402A : US Code - Section 402A: Optional treatment of elective deferrals as Roth contributions

Search 26 U.S.C. § 402A : US Code - Section 402A: Optional treatment of elective deferrals as Roth contributions

(a) General rule
If an applicable retirement plan includes a qualified Roth
contribution program -
(1) any designated Roth contribution made by an employee
pursuant to the program shall be treated as an elective deferral
for purposes of this chapter, except that such contribution shall
not be excludable from gross income, and
(2) such plan (and any arrangement which is part of such plan)
shall not be treated as failing to meet any requirement of this
chapter solely by reason of including such program.
(b) Qualified Roth contribution program
For purposes of this section -
(1) In general
The term "qualified Roth contribution program" means a program
under which an employee may elect to make designated Roth
contributions in lieu of all or a portion of elective deferrals
the employee is otherwise eligible to make under the applicable
retirement plan.
(2) Separate accounting required
A program shall not be treated as a qualified Roth contribution
program unless the applicable retirement plan -
(A) establishes separate accounts ("designated Roth
accounts") for the designated Roth contributions of each
employee and any earnings properly allocable to the
contributions, and
(B) maintains separate recordkeeping with respect to each
account.
(c) Definitions and rules relating to designated Roth contributions
For purposes of this section -
(1) Designated Roth contribution
The term "designated Roth contribution" means any elective
deferral which -
(A) is excludable from gross income of an employee without
regard to this section, and
(B) the employee designates (at such time and in such manner
as the Secretary may prescribe) as not being so excludable.
(2) Designation limits
The amount of elective deferrals which an employee may
designate under paragraph (1) shall not exceed the excess (if
any) of -
(A) the maximum amount of elective deferrals excludable from
gross income of the employee for the taxable year (without
regard to this section), over
(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
(3) Rollover contributions
(A) In general
A rollover contribution of any payment or distribution from a
designated Roth account which is otherwise allowable under this
chapter may be made only if the contribution is to -
(i) another designated Roth account of the individual from
whose account the payment or distribution was made, or
(ii) a Roth IRA of such individual.
(B) Coordination with limit
Any rollover contribution to a designated Roth account under
subparagraph (A) shall not be taken into account for purposes
of paragraph (1).
(d) Distribution rules
For purposes of this title -
(1) Exclusion
Any qualified distribution from a designated Roth account shall
not be includible in gross income.
(2) Qualified distribution
For purposes of this subsection -
(A) In general
The term "qualified distribution" has the meaning given such
term by section 408A(d)(2)(A) (without regard to clause (iv)
thereof).
(B) Distributions within nonexclusion period
A payment or distribution from a designated Roth account
shall not be treated as a qualified distribution if such
payment or distribution is made within the 5-taxable-year
period beginning with the earlier of -
(i) the first taxable year for which the individual made a
designated Roth contribution to any designated Roth account
established for such individual under the same applicable
retirement plan, or
(ii) if a rollover contribution was made to such designated
Roth account from a designated Roth account previously
established for such individual under another applicable
retirement plan, the first taxable year for which the
individual made a designated Roth contribution to such
previously established account.
(C) Distributions of excess deferrals and contributions and
earnings thereon
The term "qualified distribution" shall not include any
distribution of any excess deferral under section 402(g)(2) or
any excess contribution under section 401(k)(8), and any income
on the excess deferral or contribution.
(3) Treatment of distributions of certain excess deferrals
Notwithstanding section 72, if any excess deferral under
section 402(g)(2) attributable to a designated Roth contribution
is not distributed on or before the 1st April 15 following the
close of the taxable year in which such excess deferral is made,
the amount of such excess deferral shall -
(A) not be treated as investment in the contract, and
(B) be included in gross income for the taxable year in which
such excess is distributed.
(4) Aggregation rules
Section 72 shall be applied separately with respect to
distributions and payments from a designated Roth account and
other distributions and payments from the plan.
(e) Other definitions
For purposes of this section -
(1) Applicable retirement plan
The term "applicable retirement plan" means -
(A) an employees' trust described in section 401(a) which is
exempt from tax under section 501(a), and
(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
(2) Elective deferral
The term "elective deferral" means any elective deferral
described in subparagraph (A) or (C) of section 402(g)(3).