Provided by your plan administration partner:
"In-Plan" Roth Conversions - Create Tax Free Source Inside the Qualified Plan
New law allows participants in 401(k) plans to convert non-Roth plan amounts and keep them inside the Plan in a new "Roth Rollover" source.
- Plans are NOT required to add Roth Provisions. However, the Plan must offer Roth deferral provisions in order to add and offer the Roth conversion feature.
- The conversion election is only available to participants who have a distributable event. Discussion of Distributable events
- Any taxable amounts that are converted to Roth amounts as part of the in-plan conversion will normally be taxable to the participant in the tax year in which the conversion takes place. Specific Conversion Rules
Impact on Plan Sponsors
The new law enables 401(k) plan sponsors to allow Roth conversions within the plan without forcing the participants to withdraw funds from the plan.
Action Items If you want to take maximum advantage of Roth provisions and deferral of tax from 2010 to 2011-2012: Amend Plan IMMEDIATELY to allow conversions NOW and add Roth deferral provisions if not already in the Plan. Call Customer Service!
If you simply want to add this availability to your plan, it can be done by amendment at any time.
Innovative Pension will assist participants in completing the internal rollover distribution. Rollover charge of $150 assessed against participant account.
Plan Cost: $500 for the Plan Amendment and Add Roth Startup cost for new deferral source and new rollover source. Continuing Annual Cost – additional $5 per plan participant.
Conversion Rules:
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Employee Deferrals for employees over age 59.5
- Deferral earnings included
- Any amount if the Participant has met the Plan's retirement Age
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Employer Match and Profit Sharing Sources ‐ Subject to:
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Seasoned assets rule
- Assets must have been in the account for at least 2 years
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Participant Age or Service Rule
- Plan must specify if assets are available to participants with a specific service and/or age requirement
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Seasoned assets rule
All conversion sources available must be permitted as distributable events under the plan document. This may require a plan amendment to make them available.
Specific Conversion Rules: Roth Rollover Conversions and Roth Deferrals
Step 1: Amend Plan to add Roth deferrals and Roth Rollover Source. Also amend to permit use of sources not currently available under the Plan Document
Step 2: Provide information regarding the ability to create an in‐Plan Rollover to eligible participants.
Step 3: Participants completes rollover forms. Innovative assists with inter‐plan transfer of funds to Roth Rollover source. Innovative provides Form 1099 at year end.
2010 Conversions: Taxes actually paid in 2011 and 2012. Participant is responsible for properly reporting the conversion event.
2011 onward: Taxes are payable in the year the conversion occurs.
Please consult your tax advisor for questions specific to your personal tax return.
Please call Innovative for specifics on the amendment needed for your Plan! 858‐748‐6500
Reach Customer Service at 858-748-6500 with questions
Plan Design 858-218-3440
Contact Us
In this Announcement:
Amend Plan to Allow Roth Conversions inside the Plan
Quick Links...
Small Business Jobs and Credit Act of 2010
Innovative Pension
14251 Danielson Street
Poway, CA 92064
For Assistance,
Call Customer Service: 1.800.98PENSION