Designated Roth Account

Owen, age 74, holds a designated Roth account in his former employer's 401(k) plan and separately owns a Roth IRA. Which of these accounts requires him to take minimum distributions during his lifetime?

1. A.Both accounts, because he has passed his required beginning dateThe required beginning date governs pre-tax retirement money. Roth accounts of either type impose no lifetime distribution requirement on the owner.
2. B.The Roth IRA only, because IRA rules are stricter than plan rulesThis has the relationship backwards; the Roth IRA is the account that never required lifetime distributions in the first place.
3. C.The designated Roth 401(k) only, because employer plans always require distributionsThat was the rule before SECURE 2.0, and rolling to a Roth IRA was the standard workaround. Designated Roth accounts no longer require lifetime distributions.
4. D.Neither account requires a lifetime distributionRoth IRAs never did, and designated Roth accounts in employer plans no longer do, so Owen may leave both untouched.

Why: A Roth IRA has never required distributions during the owner's lifetime, since the account was funded with after-tax dollars and the government is not waiting on deferred tax. SECURE 2.0 extended that treatment to designated Roth accounts inside employer plans, which had previously been subject to RMDs unless rolled to a Roth IRA. Neither account obligates Owen to withdraw anything while he is alive.

Owen Castellan, age 61, has contributed to the DESIGNATED ROTH ACCOUNT in his employer's 401(k) for three years. Separately, he opened a Roth IRA eleven years ago and has never taken a distribution from it. He now directly rolls his entire designated Roth account balance into that Roth IRA. Which statement about the rolled-over money is correct?

1. A.The money can never be withdrawn tax-free, because a designated Roth account may not be rolled into a Roth IRA.Wrong. A designated Roth 401(k) account rolls directly into a Roth IRA; that is the standard route at separation or retirement.
2. B.The rollover is itself taxable, because the designated Roth account had not completed its own five-year period at the time of the rollover.Wrong. A direct rollover from a designated Roth account to a Roth IRA is not a taxable event regardless of how long the plan account was held.
3. C.Once inside the Roth IRA it is governed by that Roth IRA's own holding period, which was satisfied years ago, so qualified tax-free distributions may begin immediately.Correct. The receiving Roth IRA's eleven-year clock controls, and Owen is past 59 1/2, so distributions are qualified.
4. D.It carries over the designated Roth account's three-year clock, so he must wait two more years before distributions are qualified.Wrong. The designated Roth account's holding period does not travel with the money into a Roth IRA.

Why: A designated Roth account inside a 401(k) and a Roth IRA each run their own five-year holding clock, and the clocks do NOT combine. What matters is that once the money lands in the Roth IRA, it is governed by the RECEIVING Roth IRA's holding period. Owen's Roth IRA has been open eleven years, so its five-year requirement was satisfied long ago, and he is past 59 1/2. Distributions of the rolled-over money are therefore qualified - entirely tax-free - immediately. The direct rollover itself is not a taxable event.