COLLECTED WISDOM™ on Roth 401k Issues
Favorable Tax Environment Adds to Roth 401k Appeal - Summary: While there are many reasons why the Roth 401k may be an attractive option for higher-income employees, what has surprised many about this innovative plan feature are the benefits it offers participants across the income spectrum, making it advantageous for a wide range of employees and plans.
Source: Vanguard, January 2012.
Roth 401k Plans Appear Poised for Growth - Summary: Roth 401k plans have been slow to catch on with plan sponsors and participants, but that may change—the result of barriers to the Roth feature coming down and greater efforts to educate investors about Roth plans.
Source: Vanguard, February 2011.
Roth 401ks in the Spotlight: Should You Amend Your 401k Plan? - Summary: More than one third of employers offer Roth 401k contributions as an option in their 401k plans and an additional 38% of those remaining indicate that they will add them in 2011. After languishing for years, Roth contributions have taken off at least partly because of 2010 changes in the US tax rules. This article covers some of the pros and cons of this option that plan sponsors should consider.
Source: Osler, Hoskin & Harcourt LLP, February 2011.
In-Plan Roth Rollovers - New Tax Planning Opportunities - Summary: The Small Business Jobs Act of 2010, in addition to offering tax breaks for small businesses, provides two new provisions involving Roth contributions and rollovers to Roth accounts under employer qualified plans. Six pages.
Source: Patterson Belknap Webb & Tyler LLP 
, December 2010.
IRS Issues Guidance on In-Plan Roth Rollovers - Summary: The Internal Revenue Service has issued Notice 2010-84 which allows plan sponsors to adopt, even after December 31, 2010, amendments providing for 2010 in-plan Roth conversions. The notice also addresses the tax rules governing in-plan Roth conversions.
Source: Buck Consultants , December 2010.
In-Plan Roth Rollover Guidance - Summary: This guidance supplies the retirement plan community with answers to the many questions that have arisen regarding the implementation, ongoing administration, and reporting of in-plan Roth conversion.
Source: McKay Hochman, December 2010.
First Round of Guidance on Roth "In-Plan" Conversions - Summary: The IRS recently posted changes to the 2010 Form 1099-R to address some of the reporting and withholding questions on Roth "in-plan" conversions. The actual guidance is explained in the attached memo and is consistent with guidance we requested as part of our comment letter to the IRS on these issues.
Source: Groom Law Group , November 2010.
Roth 401k Accounts Failing to Gain Traction - Summary: Since their introduction in January 2006, only about 31% of 401k plans have added the Roth 401k as a savings option. Further, only 7% of 401k investors with access to a Roth 401k use one. These statistics baffle many advisors.
Source: 401khelpcenter.com, August 2010.
To Roth or Not? -- That Is the Question - Summary: Do regular 401k and IRA accounts offer greater tax benefits than Roth 401ks and Roth IRAs? It is a tough question, but this paper attempts to study the relative merits of regular and Roth retirement accounts.
Source: Boston University , February 2008.
Final Roth 401k Regulations Released - Summary: Employers should ensure their trustees and third-party administrators comply with the final Roth 401k distribution, rollover and taxation rules.
Source: McDermott Will & Emery, June 2007.
Roth 401k Adoptions Growing - Summary: Approximately 14% of Vanguard's retirement savings plans adopted Roth 401k provisions by the end of 2006. By the end of 2007, Vanguard expects that figure to double. Small plans were more likely to adopt a Roth 401k feature than were large plans.
Source: CCH, May 2007.
Roth 401k Accounts Offer Retirement Saving Flexibility - Summary: Plan sponsors can now offer employees additional retirement saving flexibility. Learn the details behind the IRS regulations permitting companies to allow employees to make Roth contributions to their 401k plans on an after-tax basis.
Source: Hewitt Associates, May 2007.
Roth 401k Survey 2007 - Summary: According to this newly released Roth 401k survey, 22 percent of 401k plans surveyed offer Roth designated accounts. Among companies not currently offering the Roth 401k, 69 percent indicated that EGTRRA permanency has increased the likelihood that they will adopt Roth in the future.
Source: Profit Sharing/401k Council of America , February 2007.
How Valuable is the New Roth 401k Option? - Summary: This article reviews several advantages to the Roth 401k, including the fact that a $15,000 Roth contribution can have the same tax sheltering power as a much higher contribution made through a traditional 401k. The Roth is even more valuable if there is a risk of higher taxes on distributions.
Source: 401khelpcenter.com, May 2006.
IRS Notice 2006-44: Sample Amendment for Roth Elective Deferrals - Summary: This notice provides a sample plan amendment for sponsors, practitioners, and plan sponsors who want to provide for designated Roth contributions in their § 401k plans.
Source: Benefitslink.com , April 2006.
Comparison of Roth 401k, Roth IRA, and Traditional 401k Retirement Plans - Summary: Beginning January 1, 2006, employers have a new retirement savings option to offer employees. The plan, commonly referred to as a "Roth 401k," is a hybrid that combines features of Roth IRA and traditional 401k plans but differs in important aspects. This article and chart deals with some of the differences and similarities.
Source: 401khelpcenter.com, February 2006.
Additional IRS Proposed Regulations for Designated Roth 401k Accounts - Summary: These proposed regulations provide guidance on the taxation of distributions from designated Roth accounts and other related issues. A designated Roth account is a separate account under a 401k plan or 403b plan to which designated Roth contributions are made, and for which separate accounting of contributions, gains, and losses are maintained.
Source: Benefitslink.com , January 2006.
Roth 401k Information - Summary: Participants may be able to avoid paying tax on the investment income. This is a good Q&A on the Roth.
Source: Malvern Benefits Corporation, January 2006.
IRS Issues Final Roth 401k Regulations - Summary: With only hours to spare before plans were able to commence allowing Roth deferrals, the IRS issued the final regulations on the Roth 401k option. Unfortunately, the regulations do not include guidance on the more pressing issues of distributions and taxation.
Source: Sungard/Corbell, January 2006.
Final Regs on Designated Roth Contributions to a 401k Plan - Summary: This document contains amendments to the regulations under § 401k and (m) of the Internal Revenue Code. These regulations provide guidance concerning the requirements for designated Roth contributions under qualified cash or deferred arrangements described in § 401k. These regulations affect section 401k plans that provide for designated Roth contributions and participants eligible to make elective contributions under these plans.
Source: Benefitslink.com , December 2005.
Tax Diversification and the Roth 401k - Summary: The new Roth 401k feature becomes available for retirement savings plans on January 1, 2006. This report analyzes the technical features of the new Roth provision and suggests which participants should—and those who should not—consider using the new feature. The study also points out that the Roth 401k affords many plan participants the ability to pursue a valuable new strategy in their plan accounts—the strategy of tax diversification.
Source: Vanguard Center for Retirement Research , October 2005.
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