Roth 403(b) Plans for Nonprofits

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Roth 403(b) Plans for Nonprofits

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Non-profit organizations can now offer a Roth 403(b) to their employees, thanks to new rules that took effect in 2006.

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286 Words; formatted to 65 Characters per Line Distribution Date and Time: Tue Jan 10 16:32:16 EST 2006

Written By: Daniel Lamaute Copyright: 2005 Contact Email: InvestNews@aol.com

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Roth 403(b) Plans for Nonprofits Copyright © 2005 Daniel Lamaute Lamaute Capital, Inc. www.InvestSafe.com

Non-profit organizations can now offer a Roth 403(b) to their employees, thanks to new rules that took effect in 2006. Contributions to a Roth 403(b) come from the after-tax earnings of plan participants. But, the main advantage of having a Roth account is that the funds in your Roth account grow tax free and remain tax-free at time of withdrawal, provided you meet certain requirements.

Your Roth 403(b) contribution can be up to $15,000 - the maximum elective salary deferral limit for 2006 or $20,000 for those 50 and older. Employees of eligible organizations - educational institution, hospital, home health service agency, health and welfare service agency, a church or church-controlled organization - may qualify to contribute up to an additional $3,000 over the general elective deferral limit under the 15-year catch up election.

You may choose to split your 403(b) contribution between your traditional pre-tax account and the after-tax Roth account, as long as your combined total does not exceed the maximum salary deferral limit. Once your contributions are in the Roth 403(b) account, they cannot be re-characterized as pre-tax savings. Also, you can not convert traditional 403(b) assets into a Roth 403(b), or transfer Roth IRA assets to your Roth 403(b) account.

Because earnings generated in a Roth are generally not subject to income tax at distribution, the Roth 403(b) makes more sense for:

1. Those who think that they may be in a higher tax rate in the future.

2. Long term investors who do not want to take the chance of having to pay tax on the appreciation from their account.

3. Executives who are ineligible to contribute to a Roth IRA because of the income limits imposed on the Roth IRA.

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Daniel Lamaute Lamaute Capital, www.InvestSafe.com is an investment brokerage firm that specializes in retirement plans. The firm's clientele consist mostly of small businesses and nonprofit organizations.