In-Plan Roth Conversions

On September 23, 2010, Congress passed the Small Business Jobs Act.  The Act allows 401(k), 403(b) and governmental 457(b) plans the ability to allow participants eligible for a distribution to roll their pre-tax account balances into a designated Roth account within the plan.  This in-plan conversion feature is an optional feature. A plan may, but is not required to, add the feature. Details of this provision of the bill include that a plan cannot establish a designated Roth account solely for purposes of receiving these rollovers and require that a designated Roth source must be available for participants’ elective deferrals as well. However, as detailed within the available compliance bulletin, plan sponsors should proceed with caution. Many of the issues raised in the new law require further guidance from Treasury Department. Click here to read the bulletin.