Whether your 401(k) plan currently offers this feature or its addition to the plan is just being considered, why not take the following quiz to test your knowledge of this provision that continues to grow in popularity?

Test Yourself on Roth 401(k):

  1. The income limits that apply to Roth IRAs also apply to Roth 401(k) plans.
  2. Roth contributions are generally not taxed when distributed.
  3. A 10% tax penalty applies to Roth contributions and earnings if they are distributed prior to age 59½.
  4. Participants may make both traditional 401(k) and Roth 401(k) contributions, but the combined contributions cannot exceed the Internal Revenue Service’s annual maximum deferral limit.
  5. The ADP nondiscrimination test that applies to traditional 401(k) plans is also required in Roth 401(k) plans.
  6. It is not necessary for a plan to have a designated Roth option available in order for it to allow an in-plan rollover.
  7. Roth accounts must allow for designated Roth deferrals and rollover contributions.
  8. An in-plan rollover can include only amounts that are eligible to be distributed to the participant.
  9. Only investment earnings on rolled-over 401(k) contributions within a plan are taxable.

Answers to Roth 401(k) Rules Quiz

  1. False. Roth 401(k)s do not limit participation by income.
  2. True, if the distribution is “qualified” (when or after the participant reaches age 59½, on or after the participant’s death, or if the participant becomes disabled, and the participant’s first Roth contribution was made five or more years earlier).
  3. False. The 10% tax penalty applies only if the distribution is not “qualified.” It is calculated only on the earnings.
  4. True.
  5. True. Roth contributions are considered elective deferrals for the ADP test, but are generally not subject to the ACP test.
  6. False. There must be a Roth account provision in place before an in-plan rollover can be offered.
  7. True.
  8. False. The American Taxpayer Relief Act of 2012, effective January 1, 2013, removed the requirement that rollovers within the plan can consist solely of amounts that are eligible for distribution to the participant.
  9. False. Because pre-tax dollars are being rolled into an after-tax Roth account in an in-plan rollover, the entire taxable amount, not just earnings, is included in the participant’s gross income.


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Kmotion, Inc., P.O. Box 1456, Tualatin, OR 97062; www.kmotion.com

© 2013 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance, nor as the sole authority on any regulation, law, or ruling as it applies to a specific plan or situation. Plan sponsors should always consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.

For plan sponsor use only – not for use with participants or general public.

This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax for guidance on your specific situation.

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