Roth 401k FAQs:
What is a Roth 401k and how does it differ from a traditional 401k?
The Roth 401K, as the name suggests, is a hybrid offering: a combination of the Roth IRA and the traditional 401K plans.

In a traditional 401K plan, employees contribute money before tax to the 401K plan. For example, an employee earning $60,000 per year and contributing the maximum permissible $15,000 in 2006 to a 401K would pay federal and state income taxes only on $45,000. The money invested in the 401K plan will grow and will be taxed as regular income when taken out at age 59.5 years or older.

In case of the Roth 401K, the employee can now decide to make post tax contributions rather than pre tax in the normal 401K, the advantage being that distributions from the Roth 401K at age 59.5 or older will be completely tax-free.
How do I decide if a Roth 401k plan is right for me?
Start out by reading this section to learn more about the Roth 401k, then talk to your Argent advisor to determine if the plan is appropriate for your situation. You may also want to look at our Roth vs. Traditional 401k Plan Calculator.
What are the contribution limits for a Roth 401k?
The 402(g) limit applies to both Roth 401(k) and traditional pre-tax deferrals. In 2006, the maximum deferral amount is $15,000, and participants who are 50 or over may make additional catch-up deferrals of up to $5,000. The total of an individual's pre-tax deferrals and Roth deferrals may not exceed the overall 402(g) limit (plus catch-up limit, if applicable) in effect for the calendar year. Roth vs. Traditional 401k Plan Calculator.
Can a participant make both pre-tax deferrals and Roth 401k deferrals in the same year?
Yes, a 401(k) plan may be designed to permit both the pre-tax deferrals and the Roth 401(k) after tax deferrals.
Does the Roth contribution have to stay in the plan for five years in order for the earnings to be tax-free?
Yes. To withdraw the earnings tax-free, the Roth contribution must remain in the plan for at least five years and the participant must have attained age 59½ (death and disability also qualify).
How are the Roth and pre-tax deferrals accounted for in the plan?
The Roth and the pre-tax deferrals must be separately sourced and must be record kept separately. Earnings on the Roth contribution must be record kept separately from earnings on the pre-tax deferrals.
Roth IRAs have an income limit for eligibility to make contributions. Are there income limits on Roth 401(k) contributions?
No. Unlike the Roth IRA, where people whose adjusted gross income (AGI) exceeds certain limits are not eligible to make Roth IRA contributions, all participants in a qualified plan may make Roth 401k contributions regardless of the individual's AGI.
Can catch-up contributions be made as Roth contributions?
Yes, participants who are 50 or over may make additional catch-up deferrals of up to $5,000.
Can matching contributions be made on Roth contributions?
Yes. However, the matching contributions are tax-deferred rather than exempt from taxation.