In January 2006, retirement planning became even more complicated with new Roth type accounts being available for 401k and 403b plans. If your employer chooses to offer this option, you may now be given the choice of making tax deductible or non tax deductible contributions.

Employers may amend their plan documents to allow for the new options provided for under recent tax legislation. However, they are not required to make this option available at this time. If implemented, this option would enable employees to make some, all, or none of their contributions either tax deductible or non tax deductible.

The Roth IRA allows for tax free distributions whereas the traditional IRA has a taxable distribution. Of course, there is a tax deduction for the traditional IRA, but not for the Roth. Unlike the Roth IRA, there are no income limits of any kind on the new Roth 401k/403b. Therefore, for those whose incomes exceed the Roth IRA limits, it presents a great opportunity to contribute to a Roth type product.

The tax free distribution on both the Roth IRA and the new Roth type 401k/403b is available at age 59 1/2. One major difference is that the Required Minimum Distribution (RMD)rules do apply on the new option and distributions must occur no later than at age 70 1/2.

The IRS has not issued final regulations on the new law. It is anticipated that new regs will be issued on designated Roth contributions by the end of the year. Due to this factor, most employers will not be making changes to their "defined contribution" plans this year. Until that time, any of the above information is subject to be refined. You may wish to consult your financial or tax advisor to make plans accordingly.