Designated Roth contributions under which type of plan use Box 12 Code "AA"?

Designated Roth contributions that fall under a Section 401(k) plan use Box 12 Code "AA" on the employee’s Form W-2. These contributions allow employees to make post-tax contributions, meaning that taxes are paid on the contributions upfront. This is particularly advantageous for employees who expect to be in a higher tax bracket during retirement, as qualified distributions from the Roth account can be withdrawn tax-free.

The Box 12 Code "AA" is specifically designated for Roth contributions made to 401(k) plans to differentiate them from traditional pre-tax contributions, which are reported using different codes. This distinction is vital for accurate tax reporting and for individuals to understand how their contributions affect their taxable income and long-term savings strategy.

Other options like Section 457(b) plans and medical savings accounts do not utilize Code "AA" for reporting Roth contributions on the W-2 form, making them incorrect choices in this context. A Section 457(b) plan, for example, has different reporting requirements and does not specifically use this code for contributions. Therefore, the option identifying the Section 401(k) plan is the only accurate choice regarding designated Roth contributions associated with Box 12 Code "AA."