The Roth 401(k) option is best suited for employees who expect to be in the same or higher tax bracket at retirement and some “Highly Compensated Employees” that are not permitted to contribute to a Roth IRA due to income restrictions. The biggest drawbacks to the Roth 401(k)s are the fact that they are subject to the same contribution limits as traditional 401(k)s (and those limits apply to both the traditional and Roth 401(k) combined – they’re not applied separately), they result in a reduction in take-home pay (contributions are after-tax dollars), and there is uncertainty about what the future holds for employee tax brackets.

The Roth 401(k) option isn’t right for every employee. But providing employees with the option will allow them to make that decision and may lead to increased participation.

If you would like to learn more about the Roth 401(k) check out the SmartMoney article, “Understanding the Roth 401(k)” and the “Want More Retirement Planning Flexibility?” brochure that NADART supplies to its plans.

The Roth 401(k) is one of the many options that NADART offers for its plans. To learn more about the Roth 401(k) or any of the other products and services we offer, please complete the Product Information Request Form or e-mail nadart401k@nada.org.