In-Plan Roth Conversions: Consideration for 2013
January 04, 2013
Tucked in the American Taxpayer Relief Act of 2012 is a provision allowing plan sponsors to amend their 401(k), 403(b) or 457 Plans to permit an “in plan transfer” of defined contribution retirement accounts to a Roth contribution account within the plan. Such transfers will be subject to federal and state income tax, but will NOT violate any other qualified plan rules that otherwise prohibit “in-service” distributions. Although the intent of the provision appears to be a way to raise tax revenue, it provides plan sponsors with a very timely opportunity. Plan sponsors should evaluate the merits of implementing a Roth contribution provision and amending their plans to provide this conversion feature. There are several factors to consider including administrative process, employee communication, and anticipated interest among your employees.
comments powered by Disqus