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Roth 401(k) Knowledgebase

Comparison of Plan Benefits and Features

Item

Roth 401(k)

Roth IRA

2010 Individual Contribution Limit

$16,500

$5,000

Catch-up if age 50 or older in '09

$5,500

$1,000

Minimum Distribution Requirements

Applies (exception for actively employed non-5% owners)

Does Not Apply

First Time Home Buyer Exception

Does Not Apply

Applies

Qualified Distribution         5-year Rule

Clock starts in year of 1st Roth 401(k)contribution. If participant joins another employer's plan, clock continues based on original contribution date if, and only if, original Roth account is rolled over into new employer plan.

First year of 5-year period determined by the date of any contribution to any Roth IRA.  If a participant rolls over a Roth 401(k) to a Roth IRA, the original year of Roth 401(k) contribution is not considered for the 5-year qualification clock unless:

a) the rollover is qualified; or

b) it is rolled over into a previously established Roth IRA (or into a new Roth IRA and a Roth IRA previously exists). 

Taxation of Nonqualified Distribution

Partial distribution taxed based on proportionate distribution of contribution principal and interest considering Roth 401(k) account only to determine the percent of distribution treated as taxable interest.

Taxable based on first money in, first money out, meaning that tax-free contribution principal is distributed first, then taxable interest.  If Roth 401(k) account rolled over to Roth IRA, then Roth IRA rules apply to rollover.

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