White House Budget Recommends Elimination of in-Plan Roth Rollovers of After-Tax Contributions

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As reported here, the Internal Revenue Code currently permits a plan design that allows plan participants to convert non-Roth after-tax contributions to Roth contributions through in-plan Roth rollovers. This design would allow a participant to maximize deferrals to a defined contribution plan while limiting future tax liability. However, among the White House’s Fiscal Year 2016 budget proposals, which were released in February 2015, is a proposal that would eliminate the ability to convert after-tax contributions to Roth contributions through an in-plan Roth rollover. This change would be effective for distributions made after December 31, 2015. Of course, there is no guarantee that this proposal will be enacted by Congress. We will provide updates as further developments occur.

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.

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