Designated Roth Account

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DEFINITION of 'Designated Roth Account'

An individual retirement plan in which employees can have all or a portion of contributions to a 401(k) or 403(b) placed into a separate Roth retirement account. Contributions made to a designated Roth account are considered to be to a separate account within the 401(k) or 403(b) plan, and contributions, gains and losses are accounted for separately from regular 401(k) or 403(b) contributions.

BREAKING DOWN 'Designated Roth Account'

Employers can make matching contributions to the designated Roth account, just as they can to 401(k) or 403(b) accounts. Investors can make contributions to both a pre-tax, traditional retirement account and a designated Roth account during the same tax year, but the total contributions are subject to an annual contribution limit.

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