In 2016, 7.2% of plans added Roth as an option. Among plans with more than 5,000 participants, 11.2% added a Roth. Among those eligible to participate in their plan in 2016, 18.1% of participants made Roth contributions. The highest percentage of participants making Roth contributions was in plans with one to 49 participants (29.2%).
Twenty-one percent of all plans monitor investments of Roth deferrals.
“In the 12 years since Roth became available as an options where you already offer a 401(k) or 403(b) with pre-tax contributions, Roth features have demonstrated their value,” says PSCA Executive Director Jack Towarnicky.
Towarnicky says Roth could be an attractive option in the following scenarios for workers:
- Just starting their careers and expect their income tax rate could increase in the future;
- Are employed in a state that currently does not have an income tax;
- Want to build assets that will not be subject to minimum required distributions;
- Are limited by the IRS contribution maximum of $18,500 (and the additional $6,000 catch-up maximum for those 50 and older) and know that an equal amount of contributions on a Roth basis represents a significantly greater savings rate;
- Want to manage their taxable payouts in retirement with an eye to avoid Medicare Part B and Part D income surcharges;
- Are highly paid and therefore not eligible to contribute to an individual retirement account (IRA) on a Roth basis; and/or
- Want to convert taxable monies to a Roth basis today, but they are not currently eligible for a distribution that can be rolled over and converted to a Roth IRA where plans with Roth features can permit in-plan conversions at any time.
Information on how to purchase the full findings of this report, PSCA’s 60th Annual Survey, can be found here.