First available in 2006, the number of participants eligible to take distributions from Roth 401k designated accounts through their employers or Roth solo 401k plans for those who are self-employed has been minimal but will begin to pick in the coming years.
Designated Roth account assets must satisfy the distribution requirements applicable to elective deferrals (i.e., employee contributions) under the plan. For example, Roth solo 401k contributions are fully vested, are subject to required minimum distributions (RMDs), and cannot be distributed until the solo 401k participant meets a distribution triggering event under the plan (e.g., termination of employment, death, disability).
When a 401k or solo 401k plan participant takes a distribution from a designated Roth account, the participant must review a 402(f) notice, which outlines the tax and rollover options available upon plan distribution.
1099-R Reporting of Roth 401k or Roth Solo 401k Distributions
What is more, any distributions of Roth 401k or Roth Solo 401k assets must be reported on a separate Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., as follows.
- Box 1, Gross Distributions – Enter the gross distribution amount.
- Box 2a, Taxable amount – Enter the taxable amount of the distribution.
– If the distribution is a qualified distribution, enter 0 (Zero).
– If the distribution is a nonqualfied distribution, enter the taxable amount (i.e., the earnings) distributed.
- Box 4, Federal income tax withheld – Report any federal income tax withheld on a nonqualified distribution.
- Box 5, Employee contributions/Designated Roth contributions or insurance premiums – Report the basis portion of the distribution.
- Box 7, Distribution codes – Enter code B, Designated Roth account distribution, plus any adjoining applicable code.
- Box 11, 1st year of desig. Roth Contrib., – Report the first year of the five-taxable-year period.
