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COLLECTED WISDOM™ on Roth 401k Issues

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More Employers Make Roth 401k Matching Contributions

Abstract: Among employers offering Roth 401k savings programs, 40% now offer matching contributions.

Source: Planadviser.com, July 2017

More Plan Sponsors Permitting Roth Conversions

Abstract: The idea seems to be to help employees establish better tax-diversity in their retirement holdings as well as more controlled and rational ways of spending down their collected wealth once their working life ends, SHRM says.

Source: Plansponsor.com, July 2017

Does Front-Loading Taxation Increase Savings? Evidence from Roth 401k Introductions

Abstract: Can governments increase private savings by taxing savings up front instead of in retirement? Using administrative data from eleven companies that added a Roth contribution option to their existing 401k plan between 2006 and 2010, this 43-page Harvard study finds no evidence that total 401k contribution rates differ between employees hired before versus after Roth introduction.

Source: Hbs.edu, June 2017

Roth Elective Deferrals in a 401k Plan

Abstract: Before an employer decides to offer Roth deferrals in their 401k or 403(b) plan, careful consideration should be given to what is needed to properly administer the participant accounts.

Source: Consultrms.com, April 2017

Roth 401k Contributions, From the Participant's Point of View

Abstract: More employers are making a Roth option available in their 401k and 403(b) plans. So, employees must decide if they want to save on a pre-tax (tax-deferred) basis or on an after-tax basis? This article reviews a number of factors an employee will have to consider.

Source: Consultrms.com, February 2017

Roth 401k Deferrals - Answers to Common Questions

Abstract: If your 401k plan allows Roth deferrals, now is a great time to give them a fresh look. The new White House administration and Congress have both indicated a desire to cut personal income tax rates. If that happens, Roth deferrals will be more affordable than ever. You can use this FAQ to help decide if Roth 401k deferrals are right for you.

Source: Employeefiduciary.com, January 2017

Roth IRA vs 403(b)

Abstract: You may have a 403(b) retirement plan available, but all income earners also have the option to save for retirement in a Roth IRA. So, which one makes more sense? This article explains how they work and the differences.

Source: 403bwise.com, January 2017

Eight Questions Plan Sponsors Should Ask About Adding a Roth Feature

Abstract: This short article deals with eight common questions around the 401k Roth feature including, what types of employees might this appeal to, what are the limits, and can employers make a match on a participant's Roth contributions?

Source: Strategicbenefitservices.com, November 2016

The Roth 401k

Abstract: Employers can offer 401k plan participants the opportunity to make Roth 401k contributions. If you're lucky enough to work for an employer who offers this option, Roth contributions could play an important role in maximizing your retirement income.

Source: Captrustadvisors.com, August 2016

A Roth 401k Could Make a Difference in Retirement

Abstract: The conventional wisdom is that older workers in their prime earning years should focus on using the traditional 401k given the ability to reduce their current taxable income. New academic research "turns conventional wisdom on its head."

Source: Consumerreports.org, July 2016

IRS Finalizes Favorable Roth Account Rollover Guidance

Abstract: The amended regulations will enable participants to avoid current taxation on partial rollovers of nonqualified distributions from designated Roth accounts. Sponsors will need to update the "safe harbor" rollover explanation given to recipients of eligible rollover distributions from designated Roth accounts.

Source: Towerswatson.com, July 2016

Roth Accounts Can Benefit Most Retirement Savers

Abstract: Researchers from the University of Arizona and the University of Missouri at Columbia note in a report that an uncertain, progressive tax schedule is the norm in the American economy. They conclude that the optimal asset location policy for most retirement savers involves diversifying between traditional and Roth vehicles, and, contrary to conventional advice, the largest economic benefits from Roth investments accrue to high-income investors.

Source: Plansponsor.com, July 2016

Roth 401k Options Are Underused

Abstract: A Roth 401k account can be a tremendously valuable vehicle for employees to save for retirement. Unfortunately, many employers have yet to appreciate and, in some cases, communicate effectively the full potential of the Roth option.

Source: Shrm.org, May 2016

IRS Issues Final Regulations on Allocation of After-Tax Amounts From Roth Accounts

Abstract: The Internal Revenue Service issued final regulations that remove the current allocation rule and treat distributions from a Roth account made to multiple destinations as a single distribution beginning on January 1, 2016.

Source: Practicallaw.com, May 2016

Thinking of Adding a Designated Roth Option to Your Plan?

Abstract: Roth contributions are an alternative to Roth IRA contributions for participants whose income exceeds the threshold limits, because no phase-out range applies. Another draw is that the contribution potential is higher than with Roth IRAs since the larger dollar limitation for regular deferrals also applies to Roth deferrals. To offer this program is not without strings, however. Here is a list of elements to consider before implementing a designated Roth option under an employer plan.

Source: Ntsa-net.org, May 2016

Roth vs. Traditional 401ks: What to Consider for Clients

Abstract: According to the Plan Sponsor Council of America, nearly 58% of 401k plans allowed for Roth deferrals in 2014. Should an investor make Roth deferrals or traditional, pretax contributions into a 401k plan? It's a question that could have large tax implications for clients.

Source: Investmentnews.com (registration may be required), January 2016

Roth 401k -- Underrated Beauty?

Abstract: Roth has been around for almost a decade, and yet it continues to go unnoticed by plan sponsors and participants alike. Author suggests that the Roth 401k has yet to reveal itself as the stunner it is.

Source: Tristarpension.com, September 2015

Roth Accounts in DC Plans, Breaking Down the Buzzwords

Abstract: The stated objective of this article is to provide a general overview of Roth, its role and appeal within defined contribution plans, and key considerations for plan sponsors in evaluating this feature in an educated and informed manner.

Source: Porteval.com, April 2015

IRS Provides Guidance on Correcting a Roth Contribution Failure

Abstract: A common mistake encountered in the operation of a Roth feature is that the employer doesn't follow the employee's election as to the type of elective deferral. The employee elects a Roth contribution, but the employer treats it as a pre-tax deferral. The IRS has provided guidance on correcting a Roth contribution failure.

Source: Erisalawyerblog.com, January 2015

IRS Proposes Amendment to Regulations on Allocation of Roth Amounts Rolled to Multiple Accounts

Abstract: The proposed amendments to the regulations would limit prospectively the applicability of the rule regarding the allocation of after-tax amounts when distributions are made to multiple destinations.

Source: Benefitsforward.com, September 2014

Employees Are Falling for Roth 401k's

Abstract: Employees saving for retirement in workplace 401k plans are increasingly choosing the Roth option, according to a recent Aon report. When the Roth option is available, 11% of participants contribute to a Roth, up from 9.6% in 2012 and 8.1% in 2011. The report sheds some light into the decision-making process of employees and suggests that more employers should offer the Roth option.

Source: Forbes.com, August 2014

Plan Sponsors: Offer Participants Tax Diversification Through Roth 401k In-Plan Conversions

Abstract: Offering in-plan Roth conversions in your plan is a minor administration change that could potentially make a huge difference in how much your employees have available at retirement. Which participants could benefit from taking advantage of the new Roth in-plan conversion rule? Article reviews a few of the most compelling examples.

Source: 401khelpcenter.com, July 2014

Should You Convert 401k Saving to a Roth?

Abstract: Recent legislative changes now allow retirement plans to offer in-plan Roth conversions where participants can convert any existing vested, pre-tax savings into a Roth account. Article explains the Roth in-plan conversion provision and includes a guide to help employees decide if it's right for them.

Source: 401khelpcenter.com, May 2014

Roth Usage in Defined Contribution Plans

Abstract: Offering Roth accounts within a defined contribution plan has become increasingly common and, is expected soon to become the norm -- not the exception. According to Aon Hewitt's 2013 Trends & Experience in Defined Contribution Plans report, 50% of employers currently allow employees to make Roth contributions, an increase from just 11% in 2007. This paper explores participant use of these plans.

Source: Aon.com, April 2014

IRS Guidance Gives In-Plan Roth Rollovers New Life

Abstract: This article briefly reviews the history of the Roth program, summarizes the new guidance in this area, reviews the comprehensive rules applicable to all in-plan Roth rollovers, and provides action steps for plan sponsors to take a fresh look at this optional plan design feature.

Source: Groom.com, March 2014

Roth 401k Plans

Abstract: This article provides an overview of Roth 401k plans, also known as designated Roth plans. It discusses the benefits of providing employees with a Roth option, the after-tax treatment of designated Roth contributions and Internal Revenue Code (IRC) requirements governing Roth 401k plans. This article also explains the optional in-plan rollover of distributions from traditional 401k accounts to Roth 401k accounts.

Source: Groom.com, March 2014

In-Plan Roth Rollovers: Do They Make Sense for Your 401k Plan?

Abstract: This resource discusses whether plan sponsors of 401k plans should consider adding an in-plan Roth rollover to their plan. The in-plan Roth rollover permits participants to rollover their eligible non-Roth accounts to a Roth option within the same plan so that participants do not have to remove funds from their employer's plan to participate in a Roth account.

Source: Practicallaw.com, March 2014

Guidance Issued for In-Plan Rollovers to Roth Accounts

Abstract: Under the ATRA, effective January 1, 2013, Congress expanded the law by allowing for in-plan Roth conversions of defined contribution retirement plan accounts that are not otherwise distributable without any income limitations. On December 11, 2013, the IRS issued guidance (Notice 2013-74) relating to these rollovers and their expansion.

Source: Troutmansanders.com, January 2014

IRS Issues Notice on Expanded In-Plan Roth Conversion Option

Abstract: Notice 2013-74 confirms that plan sponsors that implement an in-plan Roth conversion option generally may limit the types of vested pre-tax contributions that participants can convert, may specify the frequency with which participants can elect to make in-plan conversions, and may discontinue such in-plan conversion programs. The notice further provides special time frames during which plan sponsors may adopt amendments related to in-plan Roth conversion features as well as other guidance regarding in-plan Roth conversions of both distributable and nondistributable amounts.

Source: Morganlewis.com, December 2013

More 401k Plan Sponsors Opt for Roth Conversions

Abstract: Plan sponsor adoption of 401k Roth provisions has jumped in recent years, thanks in part to IRS rules that took effect last year. Those make it possible for retirement plan participants to convert existing 401k plan balances to Roth 401k plan balances, whether or not the participant was eligible for a distribution.

Source: Benefitnews.com, November 2013

Judging Tax Implications of Roth 401k Contributions

Abstract: The decision to contribute to a Roth 401(k) instead of deferring at a tax-deferred level is often based on an anticipation of changes to future tax rates. While this is a personal decision based on future income, several other factors should also be considered.

Source: Retirementtownhall.com, October 2013

Designated Roth 401k Basic FAQs

Abstract: This FAQ covers the basics of the Roth 401k including: May the participant make both pre-tax deferrals and Roth 401k deferrals in the same year? Does the Roth contribution have to stay in the plan for five years in order for the earnings to be tax-free? May a 403(b) arrangement have Roth 403(b) contributions?

Source: McKay Hochman, October 2013

Roth 401k Usage on the Rise Among Younger Participants

Abstract: Wells Fargo announced today that in the first quarter 2013, 10 percent of all participants in Wells Fargo administered defined contribution plans chose to contribute to a Roth 401k, when available, up from 8.9 percent reported in the first quarter 2012. Notably, 16.9% of participants under age 30 contributed to a Roth 401k (up from 15.2% one year ago) as compared to 4% of participants in their 60s.

Source: 401khelpcenter.com, July 2013

Who Uses the Roth 401k, and How Do They Use It?

Abstract: The Economic Growth and Tax Relief Reconciliation Act of 2001 allowed plan sponsors to add a Roth 401k option to defined contribution savings plans starting. Like contributions to a Roth IRA, employee contributions to a Roth 401k or 403(b) are not deductible from current taxable income, but withdrawals of principal, interest, and capital gains in retirement are tax-free. This paper describes the characteristics of employees who utilize the Roth 401k and also describes how employees use the Roth 401k.

Source: NBER.org, July 2013

Roth Adoption and the New In-Plan Conversion Feature

Abstract: In this paper, authors Jean Young and Steve Utkus of Vanguard Center for Retirement Research take an in-depth look at Roth and the new American Taxpayer Relief Act of 2012 provision. They summarize current Roth adoption statistics, discuss considerations involved in making a conversion decision, and reveal why ATRA's expanded Roth conversion feature is likely to boost Roth adoption rates over time.

Source: Vanguard.com, May 2013

ATRA -- A Roth Conversion Quandary

Abstract: A recent study by Aon Hewitt of 300 employers showed the impact the American Tax Relief Act of 2012 could have on a plan sponsor's decision to amend their plan document to permit Roth contributions. Many retirement industry leaders are holding off on permitting this arrangement until further guidance is issued by the IRS.

Source: Baden Retirement Plan Services, March 2013

Roth Retirement Savings: More Accessible Than Ever

Abstract: Employers are recognizing the significant benefits a Roth option offers to certain participants, and the 2012 fiscal cliff legislation provides an impetus for taking a deeper look at why you may want to consider adding a Roth option. In this paper discusses how a Roth option may be a valuable addition to a retirement plan, and considerations for plan sponsors when deciding whether or not to offer Roth contributions.

Source: Arnerich Massena, March 2013

Roth Conversions in 401k Plans

Abstract: With an increasingly murky tax horizon, companies sponsoring 401k plans might be looking for ways to provide participants with more flexibility in managing their tax exposure when taking plan distributions. This article provides an overview of the differences between pre-tax and Roth contributions, and summarizes the main features of this new Roth conversion option.

Source: Jenner.com, March 2013

White Paper on Roth 401k Plans

Abstract: White paper provides an overview of Roth 401k plans, also known as designated Roth plans. It discusses the benefits of providing employees with a Roth option, the after-tax treatment of designated Roth contributions and Internal Revenue Code requirements governing Roth 401k plans. Also explains the optional in-plan rollover of distributions from traditional 401k accounts to Roth 401k accounts.

Source: Groom.com, February 2013

What Can Roth Do for Your Participants?

Abstract: With the recent legislative changes that have made Roth top of mind for both plan sponsors and participants, now is the time to fully reexamine the opportunities the Roth 401k option presents within the broader context of planning for retirement. Offers tips for plan sponsors attempting to educate participants about the pros and cons of Roth 401k contributions.

Source: Fidelity.com, February 2013

In-Plan Roth Transfers: Taxation FAQs

Abstract: This technical update addresses the tax rules of in-plan Roth transfers based on what we know today. The IRS will issue guidance affecting some of these issues and that guidance may differ from interpretations contained in this article.

Source: Relius.net, February 2013

In-Plan Roth Transfers: Implementation FAQs

Abstract: The IRS is working on guidance for the new Roth provision, but because it is immediately effective, practitioners are being asked questions by clients now. This article assembles a number of the frequently asked questions and responses.

Source: Relius.net, February 2013

Roth Conversion Opportunities Expand, But Practical Questions Remain

Abstract: The recent "fiscal cliff" tax law, the American Taxpayer Relief Act, includes a provision effective Jan. 1, 2013 that greatly expands the ability of plan participants to convert pre-tax plan accounts to after-tax Roth accounts, making all plan accounts potentially convertible. This is an optional provision that can be added to any 401k, 403(b), or governmental 457(b) plan that allows Roth contributions. Before plan sponsors open up this opportunity, however, there are a number of practical issues to deal with.

Source: Davis Wright Tremaine LLP, January 2013

"Fiscal Cliff" Tax Compromise Will Allow 401k Intra-Plan Roth Conversions

Abstract: The "fiscal cliff" tax compromise just passed by Congress expands the opportunity to convert pre-tax savings in a 401k plan into Roth savings. The new rule, shown here, will allow 401k participants to complete intra-plan Roth conversions.

Source: 401khelpcenter.com, January 2013

A New Roth Conversion Opportunity

Abstract: The American Taxpayer Relief Act (H.R. 8) passed by the U.S. House of Representatives and the Senate contains an important provision that offers a new opportunity to convert assets in defined contribution plans (such as Section 401k plans), Section 403(b) plans, and governmental 457(b) plans into Roth amounts within the plan. This paper outlines the basic features of the new conversion right.

Source: Americanbenefitscouncil.org, January 2013

How Valuable is the New Roth 401k Option?

Abstract: 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.


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