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.

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.

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