View From McDermott: Expanded In-Plan Conversion Opportunities Will Boost Roth 401(k) Balances

The number of defined contribution plans (including 401(k), 403(b) or 457(b) plans) with a Roth feature has grown significantly in recent years. Roth 401(k) is gaining popularity due in part to tax hedging or tax diversification strategies. Since the federal and state tax rates that apply at retirement are unknown, a participant can hedge future tax exposure by making at least some portion of his or her retirement savings as Roth 401(k) contributions. Other participants want greater retirement security with a large portion of their retirement savings not subject to income taxes. Some high net worth participants want to pass tax-free investments to their beneficiaries.

Whatever the reasoning, Roth 401(k) is gaining traction in employer-sponsored defined contribution plans. According to a survey of 400 plan sponsors in October 2013, 50 percent offered a Roth option in their 401(k) plans, as opposed to 11 percent only five years earlier. The number of participants with access to Roth features, and the size of their Roth 401(k) balances, should continue to surge following the issuance of new IRS guidance that greatly expands participants’ ability to convert retirement savings to Roth balances.

Originally published in Pension & Benefits Daily.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDermott Will & Emery | Attorney Advertising

Written by:


McDermott Will & Emery on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.