26 U.S.C. § 402A: Optional treatment of elective deferrals as Roth contributions

any designated Roth contribution made by an employee pursuant to the program shall be treated as an elective deferral for purposes of this chapter, except that such contribution shall not be excludable from gross income, any designated Roth contribution which pursuant to the program is made by the employer on the employee’s behalf on account of the employee’s contribution, elective deferral, or (subject to the requirements of section 401(m)(13)) qualified student loan payment shall be treated as a matching contribution for purposes of this chapter, except that such contribution shall not be excludable from gross income, any designated Roth contribution which pursuant to the program is made by the employer on the employee’s behalf and which is a nonelective contribution shall be nonforfeitable and shall not be excludable from gross income, and such plan (and any arrangement which is part of such plan) shall not be treated as failing to meet any requirement of this chapter solely by reason of including such program. The term “qualified Roth contribution program” means a program under which an employee may elect to make, or to have made on the employee’s behalf, designated Roth contributions in lieu of all or a portion of elective deferrals the employee is otherwise eligible to make, or of matching contributions or nonelective contributions which may otherwise be made on the employee’s behalf, under the applicable retirement plan. establishes separate accounts (“designated Roth accounts”) for the designated Roth contributions of each employee and any earnings properly allocable to the contributions, and maintains separate recordkeeping with respect to each account. is excludable from gross income of an employee without regard to this section, and the employee designates (at such time and in such manner as the Secretary may prescribe) as not being so excludable. the maximum amount of elective deferrals excludable from gross income of the employee for the taxable year (without regard to this section), over the aggregate amount of elective deferrals of the employee for the taxable year which the employee does not designate under paragraph (1). another designated Roth account of the individual from whose account the payment or distribution was made, or a Roth IRA of such individual. Any rollover contribution to a designated Roth account under subparagraph (A) shall not be taken into account for purposes of paragraph (1). there shall be included in gross income any amount which would be includible were it not part of a qualified rollover contribution, section 72(t) shall not apply, and unless the taxpayer elects not to have this clause apply, any amount required to be included in gross income for any taxable year beginning in 2010 by reason of this paragraph shall be so included ratably over the 2-taxable-year period beginning with the first taxable year beginning in 2011. In the case of an applicable retirement plan which includes a qualified Roth contribution program, this paragraph shall apply to a distribution from such plan other than from a designated Roth account which is contributed in a qualified rollover contribution (within the meaning of section 408A(e)) to the designated Roth account maintained under such plan for the benefit of the individual to whom the distribution is made. Any distribution to which this paragraph applies shall not be taken into account for purposes of paragraph (1). The rules of subparagraphs (D), (E), and (F) of section 408A(d)(3) (as in effect for taxable years beginning after 2009) shall apply for purposes of this paragraph. the plan may allow an individual to elect to have the plan transfer any amount not otherwise distributable under the plan to a designated Roth account maintained for the benefit of the individual, such transfer shall be treated as a distribution to which this paragraph applies which was contributed in a qualified rollover contribution (within the meaning of section 408A(e)) to such account, and the plan shall not be treated as violating the provisions of section 401(k)(2)(B)(i), 403(b)(7)(A)(ii), 1 403(b)(11), or 457(d)(1)(A), or of 1 See References in Text note below. section 8433 of title 5 , United States Code, solely by reason of such transfer. Any qualified distribution from a designated Roth account shall not be includible in gross income. The term “qualified distribution” has the meaning given such term by section 408A(d)(2)(A) (without regard to clause (iv) thereof). the first taxable year for which the individual made a designated Roth contribution to any designated Roth account established for such individual under the same applicable retirement plan, or if a rollover contribution was made to such designated Roth account from a designated Roth account previously established for such individual under another applicable retirement plan, the first taxable year for which the individual made a designated Roth contribution to such previously established account. The term “qualified distribution” shall not include any distribution of any excess deferral under section 402(g)(2) or any excess contribution under section 401(k)(8), and any income on the excess deferral or contribution. not be treated as investment in the contract, and be included in gross income for the taxable year in which such excess is distributed. Section 72 shall be applied separately with respect to distributions and payments from a designated Roth account and other distributions and payments from the plan. Section 401(a)(9)(A). The incidental death benefit requirements of section 401(a). include a pension-linked emergency savings account established pursuant to section 801 of the Employee Retirement Income Security Act of 1974, which, except as otherwise provided in this subsection, shall be treated for purposes of this title as a designated Roth account, and offer to enroll an eligible participant in such pension-linked emergency savings account, or automatically enroll an eligible participant in such account pursuant to an automatic contribution arrangement described in paragraph (4), and separately account for contributions to such account and any earnings properly allocable to the contributions, maintain separate recordkeeping with respect to each such account, and allow withdrawals from such account in accordance with paragraph (7). meets any age, service, and other eligibility requirements of the plan, and is not a highly compensated employee (as defined in section 414(q)). Notwithstanding subparagraph (A)(ii), an individual on whose behalf a pension-linked emergency savings account is established who thereafter becomes a highly compensated employee (as so defined) may not make further contributions to such account, but retains the right to withdraw any account balance of such account in accordance with paragraphs (7) and (8). $2,500; or an amount determined by the plan sponsor of the pension-linked emergency savings account. the participant may elect to increase the participant’s contribution to such other account, and in the absence of such a participant election, the participant is deemed to have elected to increase the participant’s contributions to such account at the rate at which contributions were being made to the pension-linked emergency savings account, and in any other case, such plan shall provide that such excess contributions will not be accepted. make contributions at a different rate, or opt out of such contributions. shall select a participant contribution rate under such automatic contribution arrangement which meets the requirements of subparagraph (A), and may amend such rate (prior to the plan year for which such amendment would take effect) not more than once annually. the purpose of the account, which is for short-term, emergency savings; the limits on, and tax treatment of, contributions to the pension-linked emergency savings account of the participant; any fees, expenses, restrictions, or charges associated with such pension-linked emergency savings account; procedures for electing to make contributions or opting out of the pension-linked emergency savings account, changing participant contribution rates for such account, and making participant withdrawals from such pension-linked emergency savings account, including any limits on frequency; the amount of the intended contribution or the change in the percentage of the compensation of the participant of such contribution, if applicable; the amount in the pension-linked emergency savings account and the amount or percentage of compensation that a participant has contributed to such account; the designated investment option under section 801(c)(1)(A)(iii) of the Employee Retirement Income Security Act of 1974 for amounts contributed to the pension-linked emergency savings account; the options under section 801(e) of such Act for the account balance of the pension-linked emergency savings account after termination of the employment of the participant; and the ability of a participant who becomes a highly compensated employee (as such term is defined in section 414(q)) to, as described in section 801(b)(2) of the Employee Retirement Income Security Act of 1974, withdraw any account balance from a pension-linked emergency savings account and the restriction on the ability of such a participant to make further contributions to the pension-linked emergency savings account. sufficiently accurate and comprehensive to apprise the participant of the rights and obligations of the participant with regard to the pension-linked emergency savings account of the participant; and written in a manner calculated to be understood by the average participant. The required notices under subparagraph (A) may be included with any other notice under the Employee Retirement Income Security Act of 1974, including under section 404(c)(5)(B) or 514(e)(3) of such Act, or under section 401(k)(13)(E) or 414(w)(4), if such other notice is provided to the participant at the time required for such notice. If an employer makes any matching contributions to a defined contribution plan of which a pension-linked emergency savings account is part, subject to the limitations of paragraph (3), the employer shall make matching contributions on behalf of an eligible participant on account of the participant’s contributions to the pension-linked emergency savings account at the same rate as any other matching contribution on account of an elective contribution by such participant. The matching contributions shall be made to the participant’s account under the defined contribution plan which is not the pension-linked emergency savings account. Such matching contributions on account of contributions to the pension-linked emergency savings account shall not exceed the maximum account balance under paragraph (3)(A) for such plan year. For purposes of any applicable limitation on matching contributions, any matching contributions made under the plan shall be treated first as attributable to the elective deferrals of the participant other than contributions to a pension-linked emergency savings account. For purposes of subparagraph (A), the term “matching contribution” has the meaning given such term in section 401(m)(4). A pension-linked emergency savings account shall allow for withdrawal by the participant on whose behalf the account is established of the account balance, in whole or in part at the discretion of the participant, at least once per calendar month and for distribution of such withdrawal to the participant as soon as practicable after the date on which the participant elects to make such withdrawal. shall be treated as a qualified distribution for purposes of subsection (d), and shall be treated as meeting the requirements of sections 401(k)(2)(B)(i), 403(b)(7)(A)(i), 403(b)(11), and 457(d)(1)(A). allow, at the election of the participant, for transfer by the participant of the account balance of such account, in whole or in part, into another designated Roth account of the participant under the defined contribution plan; and for any amounts in such account not transferred under paragraph (1), make such amounts available within a reasonable time to the participant. No amounts shall be transferred by the participant from another account of the participant under any plan of the employer into the pension-linked emergency savings account of the participant. Subparagraph (F) of section 408A(d)(3) shall not apply (including by reason of subsection (c)(4)(D) of this section) to any rollover contribution of amounts in a pension-linked emergency savings account under subparagraph (A). If any excess deferrals are distributed under section 402(g)(2)(A) to a participant, such amounts shall be distributed first from any pension-linked emergency savings account of the participant to the extent contributions were made to such account for the taxable year. Except as provided in subparagraph (B), a distribution from a pension-linked emergency savings account shall not be treated as an eligible rollover distribution for purposes of sections 401(a)(31), 402(f), and 3405. In the case of termination of employment of the participant, or termination by the plan sponsor of the pension-linked emergency savings account, except for purposes of 401(a)(31)(B), a distribution from a pension-linked emergency savings account which is contributed as provided in paragraph (8)(A)(i) shall be treated as an eligible rollover distribution. Notwithstanding section 411(d)(6), a plan which includes a pension-linked emergency savings account may cease to offer such accounts at any time. may employ reasonable procedures to limit the frequency or amount of matching contributions with respect to contributions to such account, solely to the extent necessary to prevent manipulation of the rules of the plan to cause matching contributions to exceed the intended amounts or frequency, and shall not be required to suspend matching contributions following any participant withdrawal of contributions, including elective deferrals and employee contributions, whether or not matched and whether or not made pursuant to an automatic contribution arrangement described in paragraph (4). an employees’ trust described in section 401(a) which is exempt from tax under section 501(a), a plan under which amounts are contributed by an individual’s employer for an annuity contract described in section 403(b), and an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A). any elective deferral described in subparagraph (A) or (C) of section 402(g)(3), and any elective deferral of compensation by an individual under an eligible deferred compensation plan (as defined in section 457(b)) of an eligible employer described in section 457(e)(1)(A). any matching contribution described in section 401(m)(4)(A), and any contribution to an eligible deferred compensation plan (as defined in section 457(b)) by an eligible employer described in section 457(e)(1)(A) on behalf of an employee and on account of such employee’s elective deferral under such plan, Except as provided in paragraph (2), the amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2023 . The amendment made by this section shall not apply to distributions which are required with respect to years beginning before January 1, 2024 , but are permitted to be paid on or after such date.” adjustment of the limitation under section 801(d)(1) of the Employee Retirement Income Security Act of 1974 [ 29 U.S.C. 1193(d)(1) ] and section 402A(e)(3) of the Internal Revenue Code of 1986, as added by this Act, to account for inflation; expansion of corrections programs, if necessary; model plan language and notices relating to pension-linked emergency savings accounts; and with regard to interactions with section 401(k)(13) of the Internal Revenue Code of 1986.”