Roth Contributions

[Guest IRISH79]

Employer is a non-profit entity. It sponsors a 403(b) plan under which employee pre-tax elective deferrals are made. Employer also sponsors a 401(k) profit sharing plan under which only employer profit sharing contributions are made. No pre-tax elective deferrals are made to 401(k) plan. Broker is asking if the 401(k) plan may be amended to include Roth contributions (still no employee pre-tax elective deferrals). My inclination is to say that if Roth contributions are going to be allowed they should amend the 403(b) plan.

Any thoughts?

[masteff]

See this IRS webpage: http://www.irs.gov/retirement/article/0,,id=152956,00.html

Which has an FAQ which says:

Can my plan offer only designated Roth contributions?

No, in order to provide for designated Roth contributions, a 401(k) or 403(b) plan must also offer pre-tax elective contributions.

So unless they want to add regular pre-tax to the 401(k), then you're correct that they should amend the 403(b).

[Steelerfan]

Employer also sponsors a 401(k) profit sharing plan under which only employer profit sharing contributions are made. No pre-tax elective deferrals are made to 401(k) plan..

I have to admit I've never heard of a 401(k) plan that has no pre-tax elective deferrals. I suppose the language could be there, but not actually be effective. What the employer has sounds more likely to be a plain vanilla profit sharing plan, but if you call it a 401(k), the suggestion is that deferrals are made, otherwise why would you call it a 401(k) or why you bother with with all the addittinal language necessary to keep a 401(k) qualified?