Roth Rollovers

Prior to 2013, employees were able to roll over 401(k) funds to a designated Roth account in the same plan only if the amounts were eligible for distribution. Beginning last year, plans may now allow rollovers of monies that would otherwise NOT be eligible for distribution. (You can read more about this here: IRS Provides Additional Guidance on In-Plan Roth Rollovers.) This allowance will require the plan to be amended to address these rollovers. Internal Revenue Notice 2013-74 extends the deadline for amendments to allow these rollovers to December 31, 2014, in general, but see the Notice for your specific type of plan.

There are certain restrictions related to how these rollovers are treated in the plan, so plan sponsors should seriously consider the level of utilization by participants before implementing the amendments. The additional administrative costs may outweigh the value of the provision.

Peter Alwardt is a Tax Partner specializing in employee benefits, tax and ERISA issues for domestic and international clients. He is a member of the American Institute of Certified Public Accountants and NY State Society of CPAs.

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