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Comparison Chart: Pre-Tax Deferrals, Designated Roth Deferrals, In-Plan Roth Rollovers, & Roth IRAs
Caution: Please note that some of the items included on this grid are the result of Lincoln National Corporation’s* current interpretation
of the Final Roth Regulations, the Small Business Jobs Act of 2010, and IRS Notice 2010-84. Others may reasonably have a different
interpretation of that material. In addition, this area of the law has been and continues to be subject to significant change.
Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
Who is Subject to the terms of the plan document: Subject to the terms of the plan document: Subject to the terms of the plan document: • An individual’s ability to make Roth IRA
• 401(k) – Any eligible employee • The plan document may permit designated • The plan document must first permit contribution is determined by single or married
eligible to • 403(b) – Any eligible employee Roth deferrals, as they are an optional designated Roth deferrals and also allow for filing status and Adjusted Gross Income (AGI)
establish • 457(b) Governmental – Any eligible provision the in-plan Roth rollover as described below for 2011:
employee • 401(k) – Any eligible employee • 401(k) – Any eligible employee Filing Adjusted Gross Full/Partial
a plan? • There are no income restrictions • 403(b) – Any eligible employee • 403(b) – Any eligible employee status Income (AGI) Contribution
• 457(b) Governmental – Any eligible • 457(b) Governmental – Any eligible
Single <$110,000 Full
employee employee $110,000 - $124,999 Partial
(effective for plan years beginning (effective for plan years beginning >$125,000 None
January 1, 2011) January 1, 2011)
• There are no income restrictions • There are no income restrictions Married <$173,000 Full
Filing $173,000 - $182,999 Partial
Jointly >$183,000 None
Married $0 Full
Filing $1 - $9,999 Partial
Separately >$10,000 None
Who may • Employees who expect to be in a lower tax • Younger employees in lower tax brackets • Younger employees in lower tax brackets • Younger individuals in lower tax brackets with
bracket at retirement with a long time horizon until retirement with a long time horizon until retirement a long time horizon until retirement
benefit? • Employees who want to avoid current • Employees who expect tax rates to • Employees who expect tax rates to increase • Individuals who expect tax rates to increase
taxation on deferrals and earnings increase by their retirement date by their retirement age by their retirement date
• Employees interested in estate planning • Employees interested in estate planning • Individuals interested in estate planning
opportunities • Amounts converted in 2010 are eligible to opportunities
have the tax liability spread equally over the
2011 and 2012 tax years
What are the • Contributions are made on a pre-tax basis • Contributions are made on an after-tax • N/A • Contributions are made on an after-tax basis
• Pre-tax deferrals are combined with Roth basis (not deductible) (not deductible)
contribution deferrals for the purpose of the contribution • Pre-tax deferrals are combined with Roth • Roth IRA contributions are combined with
limits? limits (as indexed) deferrals for the purpose of the contribution traditional IRA contributions for the purpose
• Contributions are limited to the lesser of limits (as indexed) of the contribution limits (as indexed)
100% of includible compensation or the • Contributions are limited to the lesser of • Contributions are limited to the lesser of
maximum dollar limit (as indexed) 100% of includible compensation or the 100% of includible compensation or the
maximum dollar limit (as indexed) maximum dollar limit (as indexed)
Tax years: 2009 - 2011 Tax years: 2009 - 2011 Tax years: 2009 - 2012
Deferral limit: Up to $16,500 Deferral limit: Up to $16,500 Deferral limit: Up to $5,000
Tax year: 2012 Tax year: 2012
Deferral limit: Up to $17,000 Deferral limit: Up to $17,000
*Affiliates of Lincoln National Corporation include, but are not limited to, The Lincoln National Life Insurance Company, Lincoln Life & Annuity
Company of New York, and Lincoln Retirement Services Company, LLC.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
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Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
Are age 50 • Available to participants who attain age 50 • Available to participants who attain age 50 • N/A • Available to participants who attain age 50 by
by the end of the taxable year by the end of the taxable year the end of the taxable year
catch-up • Pre-tax catch-up deferrals and Roth catch- • Pre-tax catch-up deferrals and Roth catch- • Roth IRA catch-up contributions are
contributions up deferrals are combined for the purpose up deferrals are combined for the purpose combined with traditional IRA contributions
of the catch-up limit of the catch-up limit for the purpose of the catch-up limit
permitted?
Tax years: 2009 - 2012 Tax years: 2009 - 2012 Tax years: 2009 - 2012
Deferral limit: Up to $5,500 Deferral limit: Up to $5,500 Deferral limit: Up to $1,000
What are Subject to the terms of the plan document, Subject to the terms of the plan document, Subject to the terms of the plan document, • Distributions are available any time from a
distributable events include: distributable events include: distributable events include: Roth IRA
distributable • Death • Death • Death • Individuals do not need to experience a
events? • Disability • Disability • Disability distributable event
• Severance from employment • Severance from employment • Severance from employment
• Retirement • Retirement • Retirement
• Plan termination • Plan termination • Plan termination
• Other in-service withdrawals (see in-service • Other in-service withdrawals (see in- • Other in-service withdrawals (see in-service
withdrawal section) service withdrawal section) withdrawal section)
Are hardship Subject to the terms of the plan document: Subject to the terms of the plan document: Subject to the terms of the plan document: • Distributions are available any time from a
• Hardship withdrawals may be permitted • Hardship withdrawals may be permitted • Hardship withdrawals may be permitted Roth IRA
withdrawals • The amount available for hardship is limited • The amount available for hardship is limited • The withdrawal is pro-rated between the in- • Individuals do not need to experience a
available? to pre-tax deferrals to Roth deferrals plan Roth rollover amount and earnings hardship event
• Earnings on pre-tax deferrals after January • The withdrawal is pro-rated between Roth • If the distribution is “non-qualified” (see
1, 1989, are not available for distribution deferrals and earnings “non-qualified distribution” section), the
• For 457(b) Governmental plans, hardship • If the distribution is “non-qualified” (see earnings will be taxable
withdrawals are allowed in the event of an “non-qualified distribution” section), the • For 457(b) Governmental plans, hardship
unforeseeable emergency earnings will be taxable withdrawals are allowed in the event of an
• For 457(b) Governmental plans, hardship unforeseeable emergency
withdrawals are allowed in the event of an
unforeseeable emergency
Are • For 401(k) and 403(b) plans, in-service • For 401(k) and 403(b) plans, in-service • Plans may permit in-service withdrawals of • Distributions are available any time from a
withdrawals for active participants are NOT withdrawals for active participants are NOT the in-plan Roth rollover account Roth IRA
in-service permitted prior to age 59½ permitted prior to age 59½ • The withdrawal is pro-rated between the in- • Individuals do not need to experience an
withdrawals • Plans may permit in-service withdrawals • Plans may permit in-service withdrawals plan Roth rollover amount and earnings in-service withdrawal event
of pre-tax deferrals after attainment of age after attainment of age 59½ • If the distribution is “non-qualified” (see
available? 59½ • The withdrawal is pro-rated between Roth “non-qualified distribution” section), the
• For 457(b) Governmental plans, in-service deferrals and earnings earnings will be taxable
withdrawals for active participants are not • If the distribution is “non-qualified” (see
permitted prior to 70½ “non-qualified distribution” section), the
earnings will be taxable
• For 457(b) Governmental plans, in-service
withdrawals for active participants are not
permitted prior to 70½
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
PAD1202-0127 EM92408 2/12
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Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
Are loans Subject to the terms of the plan document: Subject to the terms of the plan document: Subject to the terms of the plan document: • Loans are not available
• A plan may offer loans up to certain limits • A plan may offer loans up to certain limits • A plan may offer loans up to certain limits
permitted? (generally 50% of the participant’s vested (generally 50% of the participant’s vested (generally 50% of the participant’s vested
account balance) from the pre-tax deferral account balance) from the designated Roth account balance) from the in-plan Roth
account as well as other sources deferral account as well as other sources rollover account as well as other sources
• If a loan default and deemed distribution • If a loan default and deemed distribution • If a loan default and deemed distribution
occurs, the entire outstanding loan balance occurs, the loan amount represents a occurs, the loan amount represents a
becomes taxable “nonqualified” distribution “nonqualified” distribution
Are required Subject to the terms of the plan document, Subject to the terms of the plan document, Subject to the terms of the plan document, • RMD rules do not apply to Roth IRAs
distributable events include: distributable events include: distributable events include:
minimum • Generally, the RMD must be withdrawn • Generally, the RMD must be withdrawn • Generally, the RMD must be withdrawn by
distributions by April 1 following the end of the year in by April 1 following the end of the year in April 1 following the end of the year in which
which the participant reaches age 70½, or, which the participant reaches age 70½, or, the participant reaches age 70½, or, if later,
(RMD) at if later, by April 1 following the end of the if later, by April 1 following the end of the by April 1 following the end of the year in
age 70½ year in which the participant retires year in which the participant retires which the participant retires
necessary? • For 5% owners, the RMD must be • For 5% owners, the RMD must be • For 5% owners, the RMD must be
withdrawn by April 1 following the end of withdrawn by April 1 following the end of withdrawn by April 1 following the end of the
the year in which the participant reaches the year in which the participant reaches year in which the participant reaches age
age 70½, regardless of retirement age 70½, regardless of retirement 70½, regardless of retirement
• If the distribution is “non-qualified,” the • If the distribution is “non-qualified,” the
earnings will be taxable earnings will be taxable
• May roll to a Roth IRA to avoid RMD • May roll to a Roth IRA to avoid RMD
What is a • N/A. The term “qualified distribution” is BOTH of the following requirements must BOTH of the following requirements must BOTH of the following requirements must
used in the context of a Roth deferral be met: be met: be met:
“qualified account only • Roth deferral account and/or Roth • Roth deferral account and/or Roth • The Roth IRA has been in place for 5 taxable
distribution”? rollover account has been in place for 5 rollover account has been in place for 5 years (from the year of the first contribution)
taxable years (from the year the first Roth taxable years (from the year the first Roth AND
contribution or the first in-plan Roth rollover contribution or the first in-plan Roth rollover • One of the following events has occurred:
was made, whichever was first) AND was made, whichever was first) AND • Attainment of age 59½
• One of the following events has occurred: • One of the following events has occurred: • Disability
• Attainment of age 59½ • Attainment of age 59½ • Death
• Disability • Disability • Certain first-time purchase of a home
• Death • Death
• Since 2006 was the first taxable year Roth • Assuming no Roth deferrals were made in
deferrals were permitted in 401(k) and any previous years, 2010 is the first taxable
403(b) plans, 2011 was the first year that year in-plan Roth rollovers are permitted.
qualified distributions could be taken from The first year that qualified distributions
the designated Roth deferral account. can be made from the in-plan Roth rollover
account will be 2015.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
PAD1202-0127 EM92408 2/12
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Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
What is a • N/A. The term “non-qualified distribution” Subject to the terms of the plan document: Subject to the terms of the plan document: • Roth IRA account holders may take a
is used in the context of a Roth deferral • The participant may take a distribution • The participant may take a distribution even distribution even if the criteria for a qualified
“nonqualified account only. even if the criteria for a qualified if the criteria for a qualified distribution distribution have not been met (This is a
distribution”? distribution have not been met (This is a have not been met (This is a “non-qualified” “non-qualified” distribution.)
“non-qualified” distribution.) distribution.) • Ordering rules apply:
• Distribution of the Roth deferral is • Distribution of the in-plan Roth rollover Contributions are distributed first and are tax-
nontaxable, but the earnings are taxable amount is nontaxable, but the earnings are free. Earnings are distributed second and are
• Certain distributions are always considered taxable taxable if the distribution is “non-qualified.”
non-qualified: • Certain distributions are always considered
• 415 excess contributions non-qualified:
• Excess deferrals • Deemed distributions (loan defaults)
• Excess contributions
• Deemed distributions (loan defaults)
How is the • N/A. For purposes of determining a “qualified For purposes of determining a “qualified For purposes of determining a “qualified
distribution” distribution” distribution”
5-year taxable • The 5-year “clock” begins on January 1 of • The 5-year “clock” begins on January 1 of • The 5-year “clock” begins on January 1 of the
period the earliest of the following taxable years: the earliest of the following taxable years: taxable year in which the individual first made
• The year of the participant’s first Roth • The year of the participant’s first Roth a Roth contribution to any or all Roth IRAs
(“clock”) deferral to the plan, or deferral to the plan, or • The 5- year “clock” is the earlier of:
determined? • The year of the participant’s first Roth • The year of the participant’s first Roth • The date the Roth IRA was originally
deferral to another plan which is rolled deferral to another plan which is rolled established, or
over to this plan in a direct rollover, or over to this plan in a direct rollover, or • The date the first rollover was made to the
• The year of the participant’s first in-plan • The year of the participant’s first in-plan Roth IRA
Roth rollover Roth rollover • The 5-year “clock” does not transfer from a
designated Roth account or an in-plan Roth
• The designated Roth deferral account • The in-plan Roth rollover account shares Rollover account
shares the same 5-year “clock” with the in- the same 5-year “clock” with the designated • Assume no Roth IRA was established. If
plan Roth rollover account for purposes of Roth deferral account for purposes of designated Roth deferrals were made to a
determining if a distribution is a “qualified determining if a distribution is a “qualified plan in 2007 and then rolled to a Roth IRA
distribution” distribution” in 2012, the 5-year “clock” starts in 2012,
not 2007.
Special recapture tax rule: • Assume a Roth IRA was established in
• With an in-plan Roth rollover, a separate 2006. If designated Roth deferrals were
5-year “clock” will need to be maintained for made to a plan in 2007 and then rolled to
purposes of the recapture tax rule the Roth IRA in 2012, the 5-year “clock”
• If there are multiple in-plan Roth rollovers in starts in 2006, not 2007 or 2012 because
different years, each in-plan Roth rollover the earliest date is the date the Roth IRA
will have a separate 5-year “clock” for was originally established.
purposes of the recapture tax rule
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
PAD1202-0127 EM92408 2/12
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Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
What tax • Following a distributable event, the entire Taxation of earnings is determined based Taxation of earnings is determined based Taxation of earnings is determined based
pre-tax account (deferrals and earnings) on whether the distribution is “qualified” on whether the distribution is “qualified” or on whether the distribution is “qualified” or
rules apply at are subject to federal and state taxation or “non-qualified,” as follows: “non-qualified,” as follows: “non-qualified,” as follows:
distribution? • Qualified distribution – The designated • Qualified distribution – The in-plan Roth • Qualified distribution – The Roth contributions
Roth deferrals and earnings are tax-free rollover amount and earnings are tax-free and earnings are tax-free
• Non-qualified distribution – Earnings are • Non-qualified distribution – Earnings are • Non-qualified distribution – Earnings are
subject to federal and state taxation subject to federal and state taxation subject to federal and state taxation
Special recapture tax rule:
• If the in-plan Roth rollover is distributed
from the plan within the 5-year period from
the date of the rollover and the participant
is under 59½, the 10% recapture tax will
apply to the entire distribution, not just the
earnings
Does the • The premature 10% distribution penalty • The premature 10% distribution penalty • The premature 10% distribution penalty may • The premature 10% distribution penalty (on
may apply to the entire distribution taken may apply to “non-qualified” distributions apply to “non-qualified” distributions taken earnings only) may apply to “non-qualified”
premature prior to age 59½ taken prior to age 59½ prior to age 59½ distributions taken prior to age 59½
10% • Exceptions apply, such as: • Exceptions apply, such as: • Exceptions apply, such as: • Exceptions apply, such as:
• Age 55 and severance from employment • Age 55 and severance from employment • Age 55 and severance from employment • Death
distribution • Death • Death • Death • Disability
penalty • Disability • Disability • Disability • Substantially equal periodic payments
apply? • Substantially equal periodic payments • Substantially equal periodic payments • Substantially equal periodic payments • Deductible medical expenses
• Deductible medical expenses • Deductible medical expenses • Deductible medical expenses
Special recapture tax rule:
• If the in-plan Roth rollover is distributed
from the plan within the 5-year period from
the date of the rollover and the participant
is under 59½, the 10% recapture tax will
apply to the entire distribution, not just the
earnings
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
PAD1202-0127 EM92408 2/12
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Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
What are the • 20% must be withheld on the entire • 20% must be withheld on the taxable • The in-plan Roth rollover transaction will not • N/A. Voluntary withholding applies
withdrawal amount which is eligible for portion of the Roth deferral account which be subject to any withholding as the in-plan
mandatory direct rollover but which is not directly is eligible for direct rollover but which is not rollover is not a distribution from the plan
income tax rolled over directly rolled over • 20% must be withheld on the taxable portion
• Mandatory state tax withholding may also • Qualified distribution – No mandatory of the in-plan Roth rollover account which
withholding apply withholding (deferrals and earnings are is eligible for direct rollover but which is not
requirements? nontaxable) directly rolled over upon distribution from
• Non-qualified distribution – Mandatory the plan
withholding on investment earnings would • Qualified distribution – No mandatory
apply withholding (assets and earnings are
• Mandatory state tax withholding may also nontaxable)
apply • Non-qualified distribution – Mandatory
withholding on earnings would apply
• Mandatory state tax withholding may also
apply
Special recapture tax rule:
• If the in-plan Roth rollover is distributed
from the plan within the 5-year period from
the date of the rollover and the participant
is under 59½, the 10% recapture tax will
apply to the entire distribution, not just the
earnings
What direct The distribution must be an “eligible The distribution must be an “eligible The distribution must be an “eligible • If the rollover was a “qualified distribution,”
rollover” distribution and the participant rollover” distribution and the participant rollover” distribution and the participant the entire rollover (Roth deferrals and
rollover must have a distributable event must have a distributable event must have a distributable event earnings) represents the basis in the Roth
opportunities* • RMDs, hardship distributions, corrective • RMDs, hardship distributions, corrective • RMDs, hardship distributions, corrective IRA
distributions, and payments spread over distributions, and payments spread over distributions, and payments spread over • If the rollover was “non-qualified,” the
exist? 10 years or more are not “eligible rollover” 10 years or more are not “eligible rollover” 10 years or more are not “eligible rollover” custodian/trustee must separately account
distributions distributions distributions for Roth deferrals and earnings
• May roll over to another plan – 401(k), r • May roll over designated Roth account to • A Roth IRA may not be rolled over to a
403(b), or 457(b) governmental – if the another plan’s designated Roth account in a qualified plan
receiving plan accepts rollovers 401(k), 403(b), or 457(b) governmental plan • A Roth IRA may roll over to another Roth IRA
* Note: These include both • May roll over to a traditional IRA if the receiving plan accepts rollovers
full and partial rollovers. • May roll over to a Roth IRA • May roll over to a Roth IRA
• May do an in-plan Roth rollover if plan
permits (For 401(k) and 403(b) plans,
elective deferral amounts for active
participants are not eligible prior to age
59½. For 457(b) governmental plans,
elective deferral amounts for active
participants are not eligible prior to age
70½.)†
†Amounts rolled over to a Roth IRA or converted
via the in-plan Roth rollover option in 2010 are
eligible to have the tax liability spread equally
over the 2011 and 2012 tax years.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
PAD1202-0127 EM92408 2/12
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Question Pre-Tax Deferral Designated Roth Deferral In-Plan Roth Rollover Roth IRA
What indirect • May take a distribution in cash • May take a distribution in cash • May take a distribution in cash • Individuals may take a distribution of the
• 20% of the entire taxable distribution must • 20% must be withheld from the taxable • 20% must be withheld from the taxable designated Roth deferral account in cash
rollover be withheld portion of the distribution (i.e., investment portion of the distribution (i.e., investment (taxable and nontaxable) and make a
opportunities* • May roll over the distribution to another earnings of a non-qualified distribution) earnings of a non-qualified distribution) subsequent rollover to a Roth IRA
401(k), 403(b), or 457(b) governmental • If the distribution is made to the participant, • If the distribution is made to the participant, • May roll over the distribution to a Roth IRA
exist? plan within 60 days of the distribution if the the 60-day rollover rule may be used, but the 60-day rollover rule may be used, but within 60 days of distribution
(i.e., 60-day receiving plan accepts rollovers if any portion of the distribution consists of if any portion of the distribution consists of • The 5-year “clock” does not transfer to a Roth
rollover rule) • May roll over to a traditional IRA within 60 Roth contributions (nontaxable assets), the Roth rollover assets (nontaxable assets), IRA
days of distribution recipient plan must be a Roth IRA the recipient plan must be a Roth IRA
• The taxable portion only of the “non- • The taxable portion only of the “non-
qualified” distribution (i.e., investment qualified” distribution (i.e., investment
earnings) may be rolled to another 401(k), earnings) may be rolled to another 401(k),
403(b), or 457(b) governmental plan within 403(b), or 457(b) governmental plan within
* Note: These include both 60 days of the distribution if the receiving 60 days of the distribution if the receiving
full and partial rollovers. plan has a designated Roth account and plan has a designated Roth account and
accepts rollovers accepts rollovers
• The 5-year “clock” does not transfer to the • The 5-year “clock” does not transfer to the
recipient plan recipient plan
The information included in this chart is presented solely for the purpose of educating the user about pre-tax deferral accounts, designated Roth deferral accounts and in-plan Roth rollover accounts in
employer-sponsored plans and Roth IRAs. The Roth deferral information is based on Final rules regarding Roth deferrals published by the IRS on December 30, 2005, Final Roth regulations effective
April 30, 2007, the Small Business Jobs Act of 2010 passed on September 27, 2010, and IRS Notice 2010-84. Lincoln makes no representation that any or all of the material is appropriate or applicable to
all employers or participants. Those who choose to use this information do so on their own initiative and are responsible for compliance with all laws, if and to the extent such laws are applicable. Lincoln
strongly encourages you to consult your legal or tax advisors for additional information.
There is no additional tax deferral benefit for contracts purchased in an IRA or other tax-qualified plan, since these are already afforded tax-deferred status. Therefore, an annuity should only be purchased
in an IRA, 403(b) or qualified plan if the client values some of the other features of the annuity and is willing to incur any additional costs associated with the annuity to receive such benefits.
For further information regarding Roth IRAs, please consult Publication 590 – Individual Retirement Arrangements (IRAs). This publication is available at www.irs.gov.
Annuities are issued by The Lincoln National Life Insurance Company in Fort Wayne, IN. Guarantees backed by the financial strength of the insurer.
Two separate companies issue annuities: The Lincoln National Life Insurance Company of Fort Wayne, Indiana, and for contracts sold in New York, Lincoln Life & Annuity Company of Syracuse, New York.
Securities distributed by Lincoln Financial Distributors, Inc., a broker dealer and wholesale distribution organization of Lincoln Financial Group.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.
Affiliates are separately responsible for their own financial and contractual obligations.
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