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Benefits October 26, 2005
Nearly 20% of Employers to Add a Roth K Feature
October 26, 2005 (PLANSPONSOR.com) - The landscape
for Roth 401(k)s is bound to change in coming years with
nearly one in five employers who participated in a survey
saying they intended to add a Roth feature to their
plan.
Reported by Fred Schneyer
A news release from PSCA, an industry group, found that 17.4% of employers were going the Roth feature route while 35.1% don’t have current plans to do so. Four in 10 aren’t sure while the remaining respondents hadn’t given the issue any thought either way.
Among companies planning to add a Roth feature, 41.9%
intend to make the move as of January 1, 2006, 54.1% plan
to do so later in 2006 and 4.1% say they will add the
feature in 2007 or later.
Employers turning away from the Roth provision said their
top reasons include additional administrative burden
(64.4%), concerns about additional participant education
(58.4%), lack of participant demand (55.7%), concerns about
the sunset of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA) (41.6%), and
insufficient regulatory clarification (38.9%).
EGTRRA includes a provision enabling qualified 401(k) plans to permit plan participants to designate elective deferrals as Roth contributions beginning in 2006. Like contributions made to a Roth IRA, participant contributions to a Roth 401(k) plan are made with after-tax money, and the investment returns on these contributions are tax-free.
The report on the PSCA Roth survey is
here
. A free registration is required.