For many months, clients have been calling asking how to amend their 401(k) plans to add the Roth 401(k) provisions in time to permit participant education, participant completion of the deferral forms and processing those forms in time to start Roth deferrals as of January 1, 2006. We have been telling them to wait for the IRS Final Roth 401(k) regulations and guidance on the provisions that should be added to the document. The IRS had assured us that they would deliver this guidance in time.

As of November 10, 2005, the indication from the IRS is that the Final Roth 401(k) Regulations may not be issued until either very, very late in 2005 or early 2006. The exact date is not known at the time of the drafting of this E-Alert.

Thus, we are faced with the hottest retirement product in years being legally available under EGTRRA for plan year’s beginning after December 31, 2005 and no IRS Guidance on the plan language nor model amendment for implementing the Roth 401(k) into a plan document.

Rich Hochman and other industry representatives continue their discussions with the IRS toward resolving the uncertainties of Roth 401(k) implementation. We anticipate that IRS will respond shortly after November 15th. If the IRS is not in a position to release appropriate model amendment language, we will generate our own model amendment for client adoption for the 2006 plan year.

Plan document providers have taken differing opinions on the deadline for adopting the Roth 401(k) amendment for 2006. However, based on our reading of Notice 2001-42, Rev. Proc. 2004-25 and Rev. Proc 2005-66, we continue to maintain that adoption of the Roth amendment may be delayed until the end of the first plan year during which the new rules are applied. Therefore, a calendar year plan will not have to be amended until the end of 2006. The need to timely provide employee communication materials and new enrollment forms is a more pressing issue. To accommodate Roth 401(k) elections for January 1, 2006, we will make new enrollment forms available to our clients before the end of November. In addition, our parent company, Newkirk Products, Inc., is a leader in the participant communications field, and it has a variety of Roth 401(k) educational materials available for purchase.