More DC Plan Sponsors to Add Roth

February 6, 2013 ( An increasing number of U.S. employers are planning to add Roth features to their defined contribution (DC) plans in 2013, a survey found.

Immediately following the passage of the American Tax Payer Relief Act of 2012 (see “The Increased Availability of Roth In-Plan Conversions”), Aon Hewitt conducted a pulse survey of more than 300 individuals representing large U.S. employers to determine the prevalence of Roth accounts and employers’ likely actions with respect to their plans over the next 12 months. According to Aon Hewitt’s findings, while nearly half (49%) of respondents currently offer no Roth provisions, 29% of those that do not offer Roth are very or somewhat likely to add this feature in the next 12 months. Of those new adopters, more than three-quarters (76%) will add both Roth contribution and in-plan conversion features.  

The survey also found employers that already have a Roth contribution option are likely to allow employees to make in-plan conversions to Roth accounts. Of those respondents that currently allow Roth contributions but do not offer in-plan conversions, more than half (53%) are very or somewhat likely to add this feature in the next 12 months.  

For companies that already allow Roth contributions and in-plan conversions, more than three-quarters (79%) are very or somewhat likely to expand the eligibility for in-plan conversions, allowing them for previously nondistributable amounts.  

“While employers have steadily been adopting Roth features in recent years, the new law, along with a better understanding of Roth by both participants and companies, will encourage more plan sponsors to add these options in the near-term,” said Patti Balthazor Bjork, director of Retirement Research at Aon Hewitt.