3785 / What is the separate accounting requirement applicable to a designated Roth 401(k) or 403(b) account?

For a designated Roth account, the plan must maintain separate accounts and recordkeeping for each employee’s designated Roth contributions and any earnings that are allocated to the contributions.¹ The separate accounting requirement is violated by “any transaction or accounting methodology involving an employee’s designated Roth account and any other accounts under the plan or plans of an employer that has the effect of directly or indirectly transferring value from another account into the designated Roth account.” A transaction that merely exchanges investments between accounts at fair market value will not violate the separate accounting requirement.²

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1. IRC § 402A(b)(2).

2. Treas. Reg. § 1.402A-1, A-13(a).

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