TD 9237_Final

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drug application (NADA) filed by
Elanco Animal Health. The
supplemental NADA revises the
description of growing cattle fed
monensin Type C medicated feeds for
increased rate of weight gain and for
prevention and control of coccidiosis.
DATES: This rule is effective January 3,
2006.
FOR FURTHER INFORMATION CONTACT: Eric
S. Dubbin, Center for Veterinary
Medicine (HFV–126), Food and Drug
Administration, 7500 Standish Pl.,
Rockville, MD 20855, 301–827–0232, email: [email protected].
SUPPLEMENTARY INFORMATION: Elanco
Animal Health, A Division of Eli Lilly
& Co., Lilly Corporate Center,
Indianapolis, IN 46285, filed a
supplement to NADA 95–735 that
provides for the use of RUMENSIN 80
(monensin sodium) Type A medicated
article. The supplemental NADA revises
the description of growing cattle fed
monensin Type C medicated feeds for
increased rate of weight gain and for
prevention and control of coccidiosis.
The supplemental NADA is approved as
of November 18, 2005, and the
regulations in 21 CFR 558.355 are
amended to reflect the approval. The
basis of approval is discussed in the
freedom of information summary.
In accordance with the freedom of
information provisions of 21 CFR part
20 and 21 CFR 514.11(e)(2)(ii), a
summary of safety and effectiveness
data and information submitted to
support approval of this application
may be seen in the Division of Dockets
Management (HFA–305), Food and Drug
Administration, 5630 Fishers Lane, rm.
1061, Rockville, MD 20852, between 9
a.m. and 4 p.m., Monday through
Friday.
The agency has determined under 21
CFR 25.33(a)(1) that this action is of a
type that does not individually or
cumulatively have a significant effect on
the human environment. Therefore,
neither an environmental assessment
nor an environmental impact statement
is required.
This rule does not meet the definition
of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because
it is a rule of ‘‘particular applicability.’’
Therefore, it is not subject to the
congressional review requirements in 5
U.S.C. 801–808.
List of Subjects in 21 CFR Part 558
Animal drugs, Animal feeds.
■ Therefore, under the Federal Food,
Drug, and Cosmetic Act and under
authority delegated to the Commissioner
of Food and Drugs and redelegated to
the Center for Veterinary Medicine, 21
CFR part 558 is amended as follows:

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PART 558—NEW ANIMAL DRUGS FOR
USE IN ANIMAL FEEDS
1. The authority citation for 21 CFR
part 558 continues to read as follows:

■

2. In § 558.355, in paragraph
(f)(3)(iii)(b), remove ‘‘Feed to pasture
cattle (slaughter, stocker, feeder, and
dairy and beef replacement heifers).’’;
and revise paragraphs (f)(3)(iii)(a),
(f)(3)(x)(a), and (f)(3)(x)(c) to read as
follows:

■

Monensin.

*

*
*
*
*
(f) * * *
(3) * * *
(iii) * * *
(a) Indications for use. Growing cattle
on pasture or in dry lot (stocker and
feeder cattle and dairy and beef
replacement heifers): For increased rate
of weight gain; for prevention and
control of coccidiosis due to Eimeria
bovis and E. zuernii.
*
*
*
*
*
(x) * * *
(a) Indications for use. Growing cattle
on pasture or in dry lot (stocker and
feeder cattle and dairy and beef
replacement heifers): For increased rate
of weight gain; for prevention and
control of coccidiosis due to Eimeria
bovis and E. zuernii.
*
*
*
*
*
(c) Limitations. Feed at a rate of 50 to
200 milligrams per head per day. During
the first 5 days of feeding, cattle should
receive no more than 100 milligrams per
day. Do not feed additional salt or
minerals. Do not mix with grain or other
feeds. Monensin is toxic to cattle when
consumed at higher than approved
levels. Stressed and/or feed- and/or
water-deprived cattle should be adapted
to the pasture and to unmedicated
mineral supplement before using the
monensin mineral supplement. The
product’s effectiveness in cull cows and
bulls has not been established.
Consumption by unapproved species
may result in toxic reactions.
*
*
*
*
*
Dated: December 14, 2005.
Stephen D. Vaughn,
Director, Office of New Animal Drug
Evaluation, Center for Veterinary Medicine.
[FR Doc. 05–24671 Filed 12–30–05; 8:45 am]
BILLING CODE 4160–01–S

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Internal Revenue Service
26 CFR Parts 1 and 602
[TD 9237]

Authority: 21 U.S.C. 360b, 371.

§ 558.355

DEPARTMENT OF THE TREASURY

RIN 1545–BE05

Designated Roth Contributions to
Cash or Deferred Arrangements Under
Section 401(k)
Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
AGENCY:

SUMMARY: This document contains
amendments to the regulations under
section 401(k) and (m) of the Internal
Revenue Code. These regulations
provide guidance concerning the
requirements for designated Roth
contributions under qualified cash or
deferred arrangements described in
section 401(k). These regulations affect
section 401(k) plans that provide for
designated Roth contributions and
participants eligible to make elective
contributions under these plans.
DATES: Effective Date: These regulations
are effective January 1, 2006.
Applicability Date: These regulations
apply to plan years beginning on or after
January 1, 2006.
FOR FURTHER INFORMATION CONTACT:
Cathy A. Vohs, 202–622–6090 or R. Lisa
Mojiri-Azad, 202–622–6060 (not tollfree numbers).
SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act
The collection of information
contained in these final regulations has
been reviewed and approved by the
Office of Management and Budget in
accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C.
3507(d)) under control number 1545–
1930.
The collection of information in these
regulations is in 26 CFR 1.401(k)–
1(f)(1)&(2). This information is required
to comply with the separate accounting
and recordkeeping requirements of
section 402A.
The estimated annual burden per
respondent under control number 1545–
1930 is 1 hour.
Comments concerning the accuracy of
this burden estimate and suggestions for
reducing this burden should be sent to
the Internal Revenue Service, Attn: IRS
Reports Clearance Officer,
SE:CAR:MP:T:T:SP Washington, DC
20224, and to the Office of Management
and Budget, Attn: Desk Officer for the
Department of the Treasury, Office of

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Information and Regulatory Affairs,
Washington, DC 20503.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a valid control
number assigned by the Office of
Management and Budget.
Books or records relating to a
collection of information must be
retained as long as their contents might
become material in the administration
of any Internal Revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.
Background
This document contains amendments
to the Income Tax Regulations (26 CFR
Part 1) under section 401(k) and (m) of
the Internal Revenue Code of 1986
(Code). The amendments provide
guidance on designated Roth
contributions under section 402A of the
Code, added by section 617(a) of the
Economic Growth and Tax Relief
Reconciliation Act of 2001 (Pub. L. 107–
16, 115 Stat. 38) (EGTRRA).
Section 401(k) provides that a profitsharing, stock bonus, pre-ERISA money
purchase or rural cooperative plan will
not fail to qualify under section 401(a)
merely because it contains a qualified
cash or deferred arrangement.
Contributions made at the election of an
employee under a qualified cash or
deferred arrangement are known as
elective contributions. Generally, such
elective contributions are not includible
in gross income at the time contributed
and are sometimes referred to as pre-tax
elective contributions.
Under section 402A, effective for tax
years beginning on or after January 1,
2006, a plan may permit an employee
who makes elective contributions under
a qualified cash or deferred arrangement
to designate some or all of those
contributions as designated Roth
contributions. Designated Roth
contributions are elective contributions
under a qualified cash or deferred
arrangement that, unlike pre-tax elective
contributions, are currently includible
in gross income. However, a qualified
distribution of designated Roth
contributions is excludable from gross
income.
Although designated Roth
contributions under a qualified cash or
deferred arrangement bear some
similarity to contributions to a Roth IRA
described in section 408A (e.g.,
contributions to either type of account
are after-tax contributions and qualified
distributions from either type of account
are excludable from gross income), there
are many differences between these

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types of arrangements. For example,
under section 408A(c)(3), an individual
is ineligible to make Roth IRA
contributions if his or her modified
adjusted gross income exceeds certain
limits, but section 402A does not
impose any comparable income limits
on an individual’s eligibility to make
designated Roth contributions under a
qualified cash or deferred arrangement.
In addition, under section 408A(d)(3), a
traditional IRA may be converted to a
Roth IRA, but section 402A does not
provide for a conversion of a pre-tax
elective contribution account under a
qualified cash or deferred arrangement
to a designated Roth account. Also,
under section 408A(d)(4), specific
ordering rules apply to distributions
from Roth IRAs. Section 402A, however,
does not provide a specific ordering rule
for distributions from designated Roth
accounts, so section 72 applies to
determine the character of distributions
from such accounts.
On December 29, 2004, final
regulations under section 401(k) were
issued (69 FR 78144). Those regulations
generally apply to plan years beginning
on or after January 1, 2006, although
they also may be applied to plan years
ending after December 29, 2004. Under
those final regulations, § 1.401(k)–1(f)
was reserved for special rules for
designated Roth contributions. On
March 2, 2005, proposed regulations to
fill in that reserved paragraph and
provide additional rules applicable to
designated Roth contributions were
issued (70 FR 10062). Written public
comments were received on the
proposed regulations and public
reaction to the proposed regulations
generally was favorable. After
consideration of the comments, these
final regulations adopt the provisions of
the proposed regulations with certain
modifications, the most significant of
which are highlighted below.
Explanation of Provisions
Rules Relating to Designated Roth
Contributions
These final regulations retain the
special rules which were included in
the proposed regulations relating to
designated Roth contributions under a
section 401(k) plan. Thus, these final
regulations amend § 1.401(k)–1(f) to
provide a definition of designated Roth
contributions and special rules with
respect to such contributions. Under
these final regulations, designated Roth
contributions are defined as elective
contributions under a qualified cash or
deferred arrangement that are: (1)
Designated irrevocably by the employee
at the time of the cash or deferred

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7

election as designated Roth
contributions that are being made in
lieu of all or a portion of the pre-tax
elective contributions the employee is
otherwise eligible to make under the
plan; (2) treated by the employer as
includible in the employee’s gross
income at the time the employee would
have received the contribution amounts
in cash if the employee had not made
the cash or deferred election (e.g., by
treating the contributions as wages
subject to applicable withholding
requirements); and (3) maintained by
the plan in a separate account. The
regulations also provide that elective
contributions may only be treated as
designated Roth contributions to the
extent permitted under the plan.
Some commentators requested that an
employer sponsoring a qualified cash or
deferred arrangement be permitted to
offer only designated Roth
contributions. However, under section
402A(b)(1), designated Roth
contributions are made in lieu of all or
a portion of elective contributions that
the employee is otherwise eligible to
make under the cash or deferred
arrangement. If a cash or deferred
arrangement offered only designated
Roth contributions, an employee
participating in the arrangement would
not be electing to make such
contributions in lieu of elective
contributions he or she was otherwise
eligible to make under the plan. Thus,
these final regulations clarify that, in
order to provide for designated Roth
contributions, a qualified cash or
deferred arrangement must also offer
pre-tax elective contributions.
Separate Accounting Requirement
These final regulations also retain the
rule that, under the separate accounting
requirement, contributions and
withdrawals of designated Roth
contributions must be credited and
debited to a designated Roth account
maintained for the employee and the
plan must maintain a record of the
employee’s investment in the contract
(i.e., designated Roth contributions that
have not been distributed) with respect
to the employee’s designated Roth
account. In addition, gains, losses, and
other credits or charges must be
separately allocated on a reasonable and
consistent basis to the designated Roth
account and other accounts under the
plan. The proposed regulations
provided that forfeitures may not be
allocated to the designated Roth
account. The final regulations retain this
rule and, in response to comments,
clarify that no contributions other than
designated Roth contributions and
rollover contributions described in

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section 402A(c)(3)(B) are permitted to be
allocated to a designated Roth account.
For example, matching contributions are
not permitted to be allocated to a
designated Roth account. The final
regulations also retain the rule that the
separate accounting requirement applies
at the time the designated Roth
contribution is contributed to the plan
and must continue to apply until the
designated Roth account is completely
distributed.
Other Rules
These final regulations retain the
requirement that a designated Roth
contribution must satisfy the
requirements applicable to any other
elective contributions made under a
qualified cash or deferred arrangement.
Thus, designated Roth contributions are
subject to the nonforfeitability and
distribution restrictions applicable to
elective contributions and are taken into
account under the actual deferral
percentage test (ADP test) of section
401(k)(3) in the same manner as pre-tax
elective contributions. Similarly,
designated Roth contributions may be
treated as catch-up contributions and
serve as the basis for a participant loan.
A number of commentators discussed
the application of section 401(a)(9) to
plans to which designated Roth
contributions are made. These
commentators pointed out that under
section 408A, Roth IRAs are not subject
to the rules of section 401(a)(9)(A) (i.e.,
Roth IRAs are not subject to the rules of
section 401(a)(9) while the Roth IRA
owner is alive). Although Roth IRAs are
not subject to section 401(a)(9) while the
IRA owner is alive, section 402A does
not provide comparable rules regarding
the application of section 401(a)(9) to
designated Roth accounts under a cash
or deferred arrangement. Thus, such
designated Roth accounts are subject to
the rules of section 401(a)(9)(A) and (B)
in the same manner as pre-tax elective
contributions.
In response to comments asking for
clarification, the final regulations
provide rules regarding elections to
make designated Roth contributions.
These rules specifically provide that the
rules in § 1.401(k)–1(e)(2)(ii) regarding
frequency of elections to make pre-tax
elective contributions also apply to
elections to make designated Roth
contributions. The rules also
specifically address automatic
enrollment and permit a plan to utilize
automatic enrollment in conjunction
with designated Roth contributions.
Under the final regulations, a plan that
provides for a cash or deferred election
under which contributions are made in
the absence of an affirmative election

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and that has both pre-tax elective
contributions and designated Roth
contributions must set forth the extent
to which those default contributions are
pre-tax elective contributions or
designated Roth contributions. If the
default contributions are designated
Roth contributions, then an employee
who has not made an affirmative
election is deemed to have irrevocably
designated the contributions (in
accordance with section 402A(c)(1)(B))
as designated Roth contributions.
A number of commentators addressed
direct rollovers of amounts from a
designated Roth account. In response to
these comments, the regulations clarify
that a direct rollover from a designated
Roth account under a qualified cash or
deferred arrangement may only be made
to another designated Roth account
under an applicable retirement plan
described in section 402A(e)(1) or to a
Roth IRA described in section 408A,
and only to the extent the direct rollover
is permitted under the rules of section
402(c). In addition, a plan is permitted
to treat the balance of the participant’s
designated Roth account and the
participant’s other accounts under the
plan as accounts held under two
separate plans (within the meaning of
section 414(l)) for purposes of applying
the special rule in A–11 of
§ 1.401(a)(31)–1 (under which a plan
will satisfy section 401(a)(31) even
though the plan administrator does not
permit any distributee to elect a direct
rollover with respect to eligible rollover
distributions during a year that are
reasonably expected to total less than
$200). Thus, if a participant’s balance in
the designated Roth account is less than
$200, then the plan is not required to
offer a direct rollover election with
respect to that account or to apply the
automatic rollover provisions of section
401(a)(31)(B) with respect to that
account.
Section 1.401(k)–2 contains correction
methods that may be used when a plan
fails to satisfy the ADP test for a year.
These final regulations retain the rule in
the proposed regulations relating to
these correction methods that permits a
highly compensated employee (HCE), as
defined in section 414(q), with elective
contributions for a year that include
both pre-tax elective contributions and
designated Roth contributions to elect
whether excess contributions are to be
attributed to pre-tax elective
contributions or designated Roth
contributions. There is no requirement
that the plan provide this option, and a
plan may provide for one of the
correction methods described in the
final regulations without permitting an
HCE to make such an election.

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These final regulations also retain the
rule that a distribution of excess
contributions is not includible in gross
income to the extent it represents a
distribution of designated Roth
contributions. However, the income
allocable to a corrective distribution of
excess contributions that are designated
Roth contributions is includible in gross
income in the same manner as income
allocable to a corrective distribution of
excess contributions that are pre-tax
elective contributions. The regulations
also provide a similar rule under the
correction methods that may be used
when a plan fails to satisfy the actual
contribution percentage (ACP) test in
§ 1.401(m)–2.
Additional Plan Terms
In addition to the rules relating to
section 401(k) and (m) discussed above,
there are other aspects of designated
Roth contributions that would be
reflected in plan terms and are not
addressed in these regulations. For
example, while a plan is permitted to
allow an employee to elect the character
of a distribution (i.e., whether the
distribution will be made from the
designated Roth account or other
accounts), the extent to which a plan so
permits must be set forth in the terms
of the plan.
Certain Issues Addressed in Proposed
Regulations
These final regulations do not provide
guidance with respect to the taxation of
distributions of designated Roth
contributions. For example, the
regulations do not provide guidance
with respect to the recovery of an
employee’s investment in the contract
associated with his or her designated
Roth contributions. Proposed
regulations under section 402A, to be
issued in the near future, address these
taxation issues.
Effective Date
Section 402A is effective for an
employee’s taxable years beginning after
December 31, 2005. These regulations
have the same effective date as the
regulations under section 401(k) that
they are amending. Thus, these final
regulations are generally applicable to
plan years beginning on or after January
1, 2006. If a plan is applying the section
401(k) regulations as of an earlier
effective date (as provided under those
regulations), to the extent that section
402A is effective, that same early
effective date applies to these
regulations. For a plan that has an
effective date for the section 401(k)
regulations that is after the effective date
of section 402A (either an employer that

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Federal Register / Vol. 71, No. 1 / Tuesday, January 3, 2006 / Rules and Regulations
does not have a calendar year plan or a
plan established pursuant to a collective
bargaining agreement that has a delayed
effective date for the section 401(k)
regulations), the employer may rely on
these regulations prior to the effective
date of the final section 401(k)
regulations for the plan, even if the plan
does not otherwise implement the
section 401(k) regulations earlier than
required.
These regulations do not provide
rules for the application of the EGTRRA
sunset provision (section 901 of
EGTRRA), under which the provisions
of EGTRRA do not apply to taxable,
plan, or limitation years beginning after
December 31, 2010. Unless the EGTRRA
sunset provision is repealed before it
becomes effective, additional guidance
will be needed to clarify its application.
Special Analyses
It has been determined that these
regulations are not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
has also been determined that 5 U.S.C.
553(b) does not apply to these
regulations. It is hereby certified that the
collection of information in these
regulations will not have a significant
economic impact on a substantial
number of small entities. This
certification is based on the fact that
most small entities that maintain a
section 401(k) plan use a third party
provider to administer the plan.
Therefore, an analysis under the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to
section 7805(f) of the Code, the
proposed regulations preceding these
regulations were submitted to the Chief
Counsel for Advocacy of the Small
Business Administration for comment
on its impact on small business.
Drafting Information
The principal authors of these
regulations are R. Lisa Mojiri-Azad and
Cathy A. Vohs of the Office of the
Division Counsel/Associate Chief
Counsel (Tax Exempt and Government
Entities). However, other personnel
from the IRS and Treasury participated
in the development of these regulations.

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List of Subjects
26 CFR Part 1 (1.401–0—1.420–1)
Bonds; Employee benefit plans;
Income taxes; Pensions; Reporting and
recordkeeping requirements; Securities;
Trusts and trustees.
26 CFR Part 602
Reporting and recordkeeping
requirements.

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Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:

■

PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read, in part, as
follows:

■

Authority: 26 U.S.C. 7805 * * *
■ Par. 2. Section 1.401(k)–0 is amended
as follows:
1. The entry for § 1.40(k)–1(f) is
revised and entries for § 1.401(k)–1(f)(1),
(2), (3), (4) and (5) are added.
2. An entry for § 1.401(k)–
2(b)(2)(vi)(C) is added.
The additions read as follows:

§ 1.401(k)–0

*

*

Table of contents.

*

*

*

§ 1.401(k)–1 Certain cash or deferred
arrangements.

*

*
*
*
*
(f) Special rules for designated Roth
contributions.
(1) In general.
(2) Separate accounting required.
(3) Designated Roth contributions
must satisfy rules applicable to elective
contributions.
(i) In general.
(ii) Special rules for direct rollovers.
(4) Rules regarding designated Roth
contribution elections.
(i) Frequency of elections.
(ii) Default elections.
(5) Effective date.
(i) In general.
(ii) Sunset provisions.
*
*
*
*
*
§ 1.401(k)–2

ADP test.

*

*
*
*
*
(b) * * *
(2) * * *
(vi) * * *
(C) Corrective distributions
attributable to designated Roth
contributions.
*
*
*
*
*
■ Par. 3. Section 1.401(k)–1(f) is revised
as follows:
§ 1.401(k)–1 Certain cash or deferred
arrangements.

*

*
*
*
*
(f) Special rules for designated Roth
contributions—(1) In general. The term
designated Roth contribution means an
elective contribution under a qualified
cash or deferred arrangement that, to the
extent permitted under the plan, is—
(i) Designated irrevocably by the
employee at the time of the cash or
deferred election as a designated Roth

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9

contribution that is being made in lieu
of all or a portion of the pre-tax elective
contributions the employee is otherwise
eligible to make under the plan;
(ii) Treated by the employer as
includible in the employee’s gross
income at the time the employee would
have received the amount in cash if the
employee had not made the cash or
deferred election (e.g., by treating the
contributions as wages subject to
applicable withholding requirements);
and
(iii) Maintained by the plan in a
separate account (in accordance with
paragraph (f)(2) of this section).
(2) Separate accounting required.
Under the separate accounting
requirement of this paragraph (f)(2),
contributions and withdrawals of
designated Roth contributions must be
credited and debited to a designated
Roth account maintained for the
employee and the plan must maintain a
record of the employee’s investment in
the contract (i.e., designated Roth
contributions that have not been
distributed) with respect to the
employee’s designated Roth account. In
addition, gains, losses, and other credits
or charges must be separately allocated
on a reasonable and consistent basis to
the designated Roth account and other
accounts under the plan. However,
forfeitures may not be allocated to the
designated Roth account and no
contributions other than designated
Roth contributions and rollover
contributions described in section
402A(c)(3)(B) may be allocated to such
account. The separate accounting
requirement applies at the time the
designated Roth contribution is
contributed to the plan and must
continue to apply until the designated
Roth account is completely distributed.
(3) Designated Roth contributions
must satisfy rules applicable to elective
contributions—(i) In general. A
designated Roth contribution must
satisfy the requirements applicable to
elective contributions made under a
qualified cash or deferred arrangement.
Thus, for example, a designated Roth
contribution must satisfy the
requirements of paragraphs (c) and (d)
of this section and is treated as an
employer contribution for purposes of
sections 401(a), 401(k), 402, 404, 409,
411, 412, 415, 416 and 417. In addition,
the designated Roth contributions are
treated as elective contributions for
purposes of the ADP test. Similarly, the
designated Roth account under the plan
is subject to the rules of section
401(a)(9)(A) and (B) in the same manner
as an account that contains pre-tax
elective contributions.

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(ii) Special rules for direct rollovers. A
direct rollover from a designated Roth
account under a qualified cash or
deferred arrangement may only be made
to another designated Roth account
under an applicable retirement plan
described in section 402A(e)(1) or to a
Roth IRA described in section 408A,
and only to the extent the rollover is
permitted under the rules of section
402(c). Moreover, a plan is permitted to
treat the balance of the participant’s
designated Roth account and the
participant’s other accounts under the
plan as accounts held under two
separate plans (within the meaning of
section 414(l)) for purposes of applying
the special rule in A–11 of
§ 1.401(a)(31)–1 (under which a plan
will satisfy section 401(a)(31) even
though the plan administrator does not
permit any distributee to elect a direct
rollover with respect to eligible rollover
distributions during a year that are
reasonably expected to total less than
$200).
(4) Rules regarding designated Roth
contribution elections—(i) Frequency of
elections. The rules under paragraph
(e)(2)(ii) of this section regarding
frequency of elections apply in the same
manner to both pre-tax elective
contributions and designated Roth
contributions. Thus, an employee must
have an effective opportunity to make
(or change) an election to make
designated Roth contributions at least
once during each plan year.
(ii) Default elections—(A) In the case
of a plan that provides for both pre-tax
elective contributions and designated
Roth contributions and in which, under
paragraph (a)(3)(ii) of this section, the
default in the absence of an affirmative
election is to make a contribution under
the cash or deferred arrangement, the
plan terms must provide the extent to
which the default contributions are pretax elective contributions and the extent
to which the default contributions are
designated Roth contributions.
(B) If the default contributions under
the plan are designated Roth
contributions, then an employee who
has not made an affirmative election is
deemed to have irrevocably designated
the contributions (in accordance with
section 402A(c)(1)(B)) as designated
Roth contributions.
(5) Effective date—(i) In general.
Section 402A is effective for taxable
years beginning after December 31,
2005.
(ii) Sunset provisions. The rules set
forth in this paragraph (f) do not address
the application of section 901 of the
Economic Growth and Tax Relief
Reconciliation Act of 2001 (Public Law
107–16; 115 Stat. 38) (under which the

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amendments made by that Act do not
apply to taxable, plan, or limitation
years beginning after December 31,
2010).
*
*
*
*
*
■ Par. 4. Section 1.401(k)–2 is amended
as follows:
1. A new sentence is added after the
second sentence in paragraph (b)(1)(ii).
2. The last sentence in paragraph
(b)(2)(vi)(B) is amended by adding the
phrase ‘‘, except to the extent provided
in paragraph (b)(2)(vi)(C) of this
section’’ at the end.
3. Paragraph (b)(2)(vi)(C) is added.
The additions read as follows:
§ 1.401(k)–2

ADP test.

*

*
*
*
*
(b) * * *
(1) * * *
(ii) * * * Similarly, a plan may
permit an HCE with elective
contributions for a year that includes
both pre-tax elective contributions and
designated Roth contributions to elect
whether the excess contributions are to
be attributed to pre-tax elective
contributions or designated Roth
contributions. * * *
*
*
*
*
*
(2) * * *
(vi) * * *
(C) Corrective distributions
attributable to designated Roth
contributions. Notwithstanding
paragraphs (b)(2)(vi)(A) and (B) of this
section, a distribution of excess
contributions is not includible in gross
income to the extent it represents a
distribution of designated Roth
contributions. However, the income
allocable to a corrective distribution of
excess contributions that are designated
Roth contributions is included in gross
income in accordance with paragraph
(b)(2)(vi)(A) or (B) of this section (i.e., in
the same manner as income allocable to
a corrective distribution of excess
contributions that are pre-tax elective
contributions).
*
*
*
*
*
■ Par. 5. Section 1.401(k)–6 is amended
as follows:
1. The definitions of ‘‘Designated Roth
account’’ and ‘‘Designated Roth
contributions’’ are added after the
definition of Current year testing
method.
2. A new definition of ‘‘Pre-tax
elective contributions’’ is added after
the definition of Pre-ERISA money
purchase pension plan.
The additions read as follows:
§ 1.401(k)–6

Definitions.

*

*
*
*
*
Designated Roth account. Designated
Roth account means a separate account

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maintained by a plan to which only
designated Roth contributions
(including income, expenses, gains and
losses attributable thereto) are made.
Designated Roth contributions.
Designated Roth contributions means
designated Roth contributions as
defined in § 1.401(k)–1(f)(1).
*
*
*
*
*
Pre-tax elective contributions. Pre-tax
elective contributions means elective
contributions under a qualified cash or
deferred arrangement that are not
designated Roth contributions.
*
*
*
*
*
■ Par. 6. Section 1.401(m)–0 is amended
by adding an entry for § 1.401(m)–
2(b)(2)(vi)(C) to read as follows:
§ 1.401(m)–0

*

*

*

§ 1.401(m)–2

Table of contents.

*

*

ACP test.

*

*
*
*
*
(b) * * *
(2) * * *
(vi) * * *
(C) Corrective distributions
attributable to designated Roth
contributions.
*
*
*
*
*
■ Par. 7. Section 1.401(m)–2 is amended
as follows:
1. The last sentence in paragraph
(b)(2)(vi)(B) is amended by adding the
phrase ‘‘, or as provided in paragraph
(b)(2)(vi)(C) of this section’’ at the end.
2. Paragraph (b)(2)(vi)(C) is added.
The additions read as follows:
§ 1.401(m)–2

*

ACP test.

*
*
*
*
(b) * * *
(2) * * *
(vi) * * *
(C) Corrective distributions
attributable to designated Roth
contributions. Notwithstanding
paragraphs (b)(2)(vi)(A) and (B) of this
section, a distribution of excess
aggregate contributions is not includible
in gross income to the extent it
represents a distribution of designated
Roth contributions. However, the
income allocable to a corrective
distribution of excess aggregate
contributions that are designated Roth
contributions is taxed in accordance
with paragraph (b)(2)(vi)(A) or (B) of
this section (i.e., in the same manner as
income allocable to a corrective
distribution of excess aggregate
contributions that are not designated
Roth contributions).
*
*
*
*
*
■ Par. 8. Section 1.401(m)–5 is amended
by adding a definition of ‘‘Designated
Roth contributions’’ after the definition

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Federal Register / Vol. 71, No. 1 / Tuesday, January 3, 2006 / Rules and Regulations
temporary regulations relate to sections
6011 and 6302 of the Internal Revenue
Code (Code) concerning reporting and
§ 1.401(m)–5 Definitions.
paying income taxes withheld from
*
*
*
*
*
wages and reporting and paying taxes
Designated Roth contributions.
under the Federal Insurance
Designated Roth contributions means
Contributions Act (FICA) (collectively,
designated Roth contributions as
employment taxes). These temporary
defined in § 1.401(k)–1(f)(1).
regulations provide requirements for
*
*
*
*
*
filing returns under FICA and returns of
income tax withheld under section 6011
PART 602—OMB CONTROL NUMBERS and §§ 31.6011(a)–1 and 31.6011(a)–4 of
UNDER THE PAPERWORK
the Employment Tax Regulations.
REDUCTION ACT
These temporary regulations generally
require employers who receive written
■ Par. 9. The authority citation for part
notification from the Commissioner of
602 continues to read as follows:
their qualification for the Form 944
Authority: 26 U.S.C. 7805.
Program to file a Form 944, ‘‘Employer’s
■ Par. 10. In § 602.101, paragraph (b) is
Annual Federal Tax Return,’’ rather
amended by adding an entry for
than Form 941, ‘‘Employer’s Quarterly
‘‘1.401(k)–1’’ in numerical order to the
Federal Tax Return.’’ In addition, these
table to read, in part, as follows:
temporary regulations provide
requirements for employers to make
§ 602.101 OMB Control numbers.
deposits of employment taxes under
*
*
*
*
*
section 6302 and § 31.6302–1. These
(b) * * *
temporary regulations permit employers
in the Form 944 Program to deposit or
CFR part or section where
Current OMB
remit their accumulated employment
identified and described
control No.
taxes annually with their Form 944 if
they satisfy the provisions of the de
*
*
*
*
*
minimis deposit rule, as modified. Also,
1.401(k)–1 .............................
1545–1930 these temporary regulations modify the
lookback period used to determine an
*
*
*
*
*
employer’s status as a monthly or semiweekly depositor.
Mark E. Matthews,
The portions of this document that are
Deputy Commissioner for Services and
final regulations provide necessary
Enforcement.
cross-references to the temporary
Approved: December 13, 2005.
regulations as well as technical
Eric Solomon,
revisions. The technical revisions
Acting Deputy Assistant Secretary for Tax
correct the table of contents in
Policy.
§ 31.6302–0 and a cross-reference in
[FR Doc. 05–24495 Filed 12–30–05; 8:45 am]
§ 31.6302–1(e)(2) and remove all
references to an IRS district director, as
BILLING CODE 4830–01–P
that position no longer exists within the
IRS. In addition, a cross-reference to the
DEPARTMENT OF THE TREASURY
temporary regulations under section
6011 was added to the final regulations
Internal Revenue Service
under section 6071, regarding the time
for filing returns. The text of the
26 CFR Parts 1 and 31
temporary regulations also serves, in
part, as the text of the proposed
[TD 9239]
regulations set forth in the Proposed
RIN 1545–BE00
Rules section in this issue of the Federal
Register. In addition to the provisions
Time for Filing Employment Tax
contained in these temporary
Returns and Modifications to the
regulations related to the Form 944
Deposit Rules
Program, the proposed regulations
AGENCY: Internal Revenue Service (IRS),
provide a modification to the de
Treasury.
minimis deposit rule applicable to
quarterly return filers.
ACTION: Final and temporary
regulations.
DATES: Effective Date: These regulations
bjneal on PROD1PC70 with RULES

of Current year testing method to read
as follows:

SUMMARY: This document contains
temporary regulations establishing the
Employers’ Annual Federal Tax
Program (Form 944) (hereinafter referred
to as the Form 944 Program). The

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are effective as of January 1, 2006.
Applicability Date: These regulations
apply with respect to taxable years
beginning on or after January 1, 2006.
The applicability of §§ 31.6011–1T,

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11

31.6011–4T, and 31.6302–1T will expire
on or before December 30, 2008.
FOR FURTHER INFORMATION CONTACT:
Raymond Bailey, (202) 622–4910 (filing
requirements under section 6011), or
Audra Dineen, (202) 622–4940 (deposit
requirements under section 6302) (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background and Explanation of
Provisions
These temporary regulations amend
the Regulations on Employment Taxes
and Collection of Income Tax at Source
(26 CFR part 31) under section 6011
relating to the Federal employment tax
return filing requirements and section
6302 relating to the employment tax
deposit requirements.
Section 31.6011(a)–1 of the
Employment Tax Regulations provides
rules requiring employers to file returns
quarterly to report FICA taxes. Section
31.6011(a)–4 of the Employment Tax
Regulations requires that every person
required to make a return of income tax
withheld from wages pursuant to
section 3402 shall make a return
quarterly. Under these existing
regulations, employers must file Form
941, ‘‘Employer’s Quarterly Federal Tax
Return,’’ each quarter reporting FICA
taxes and income tax withheld. Certain
employers, however, file returns
reporting FICA and income tax withheld
annually, such as agricultural employers
who file Form 943, ‘‘Employer’s Annual
Federal Tax Return for Agricultural
Employees.’’ Section 31.6011(a)–4(a)(3).
Existing regulations also provide certain
exceptions to the quarterly filing
requirement for wages paid for domestic
service.
Section 31.6302–1 of the Employment
Tax Regulations provides rules for
employers to make deposits of
employment taxes. Under these rules,
deposits of employment taxes reported
on Form 941 are generally made either
monthly or semi-weekly. In order for an
employer to determine its status as a
monthly or semi-weekly depositor, an
employer determines the aggregate
amount of employment taxes reported
in the 12-month period ending the
preceding June 30 (the lookback period).
New employers are treated as having an
employment tax liability of zero for any
part of the lookback period before the
date they started or acquired their
business. All employers are subject to a
‘‘One-Day rule’’ requiring employment
taxes to be deposited on the next
banking day if the employer has
accumulated $100,000 or more of
employment taxes. If an employer fails
to make timely deposits of employment

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03JAR1