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You may want to down load free from Publications 525 and 560. Here's a short take from our IRS.

What's New for 2006
Qualified Roth Contribution Program. For tax years beginning after December 31, 2005, your 401(k) plan may allow you to contribute to a qualified Roth contribution program. Under this program, you can designate all or a portion of your elective deferrals as after-tax Roth contributions. Elective deferrals designated as Roth contributions must be maintained in a separate Roth account. However, unlike other elective deferrals, designated Roth contributions are not excluded from your gross income but qualified distributions from a Roth account are excluded from your gross income. Elective deferrals. Under a Roth contribution program, the amount of elective deferrals that you may designate as a Roth contribution is limited to the maximum amount of your elective deferrals excludable from gross income for the year ($15,000 for 2006, $20,000 if age 50 or over) less the total amount of your elective deferrals not designated as a Roth contribution. Qualified distributions. A qualified distribution is a distribution that is made after the nonexclusion period and:

When you are 59 1/2 or over,

Because you are disabled, or

On or after your death.

The nonexclusion period is the 5-tax-year period beginning with the earlier of the following tax years.

The first tax year in which you made a designated Roth contribution to any designated Roth account under the same plan.

If a rollover contribution was made to your designated Roth account from a designated Roth account previously established for you under another plan, then the first tax year you made a designated Roth contribution to your previously established account.

Rollovers. A distribution from your designated Roth account can only be rolled over to another designated Roth account of yours or a Roth IRA of yours. Rollover amounts do not apply toward the annual deferral limit.

Good hunting,


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