Roth 401(k) Logistics

[Guest jgarber]

As we look at implementing the Roth 401(k), I wanted to make sure that our payroll department is properly handling the deferrals.

Let’s say that participant has:

 Annual Salary = $30,000

 Elected Pre-Tax Deferrals of 2%

 Elected Roth Deferrals of 2%

Will the total amount contributed to the retirement account be $600 ($300 in the traditional and $300 in the Roth)? The difference is that only $300 (pre-tax) reduces taxable income for tax purposes? This will result in less take-home pay for the participant because more taxes are taken out, but I don’t have to figure out the taxable net salary on 2% and have the net deposited into the Roth, do I?

[Bird]

You are correct.

[Guest BXO]

I see two 2% elections with $30,000 pay, giving a total contribution of $1,200.

[wsp]

I agree with BXO. The 2% is not combined. They are separate elections. But other than that the logic is correct.

[Guest jgarber]

Yes, sorry, the original post should have read $600 into the traditional and $600 into the Roth.

Thanks!

[Bird]

I agree too; I didn't check the math, just the words.