PLANADVISER - July/August 2018 - 20

trendspotting
Roth Conversions
Participants can move their entire balance or a portion of it
ROTH defined contribution (DC) retirement
plan accounts have seen a surge
in interest, especially with retirement
plan sponsors, since their introduction
in 2001.
According the 2017 PLANSPONSOR
Defined Contribution (DC) Survey,
68.5% of plan sponsors offered Roth
accounts last year, compared with
52.4% in 2013.
The IRS issued guidance in 2010
allowing for participants
to do an
in-plan rollover, called a conversion, of
pretax accounts to Roth accounts upon
a distributable event. But in 2012, it
expanded that ability to nondistributable
amounts. The 2017 survey found
that 41.2% of plan sponsors offered an
in-plan Roth conversion.
" A Roth conversion involves taking
assets that have been contributed on
a pre-tax basis and, just like it sounds,
converting them into Roth dollars, "
says Meghan Murphy, vice president
of Fidelity Investments.
" But, in the
process, that means you have to pay
taxes within the year that you complete
the conversion on that dollar amount. "
Participants can opt to convert their
entire pretax balance or a portion of
it. According to Murphy, most participants
will choose a specific dollar
amount, in order to diversify their
taxes in retirement.
Additionally, Jana Steele, senior
vice president and defined contribution
consultant at Callan Associates,
says taxes can play a part in considering
the amount of money to convert.
" If you're going to convert your entire
TALKING POINT
Going Fishing
Thirty-eight percent of Millennials are
saving for retirement, and, on average,
they expect to pack it in at age 56.
Source: TD Ameritrade
20 | planadviser.com july-august 2018
Art by Melinda Beck
balance, depending on what that
balance is, [taxes] can be a significant
amount, " she says.
Once participants complete a
conversion, they are issued a record of
the amount to be included as income
for that year, says Murphy. Going
forward, dollars converted will be
treated as Roth dollars in any earnings
on that money, and, as long as the cash
remains invested for five years, it will
stay tax-free for retirement.
-Amanda Umpierrez

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PLANADVISER - July/August 2018

Table of Contents for the Digital Edition of PLANADVISER - July/August 2018

Speaking Their Language
Stretching the Match
Giving Them a Break
Managed Accounts' Value
Principal Transactions
Statute of Limitations
Prohibited Transaction Relief
PLANADVISER - July/August 2018 - C1
PLANADVISER - July/August 2018 - FC1
PLANADVISER - July/August 2018 - FC2
PLANADVISER - July/August 2018 - C2
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PLANADVISER - July/August 2018 - 42
PLANADVISER - July/August 2018 - 43
PLANADVISER - July/August 2018 - Speaking Their Language
PLANADVISER - July/August 2018 - 45
PLANADVISER - July/August 2018 - 46
PLANADVISER - July/August 2018 - 47
PLANADVISER - July/August 2018 - Stretching the Match
PLANADVISER - July/August 2018 - 49
PLANADVISER - July/August 2018 - Giving Them a Break
PLANADVISER - July/August 2018 - 51
PLANADVISER - July/August 2018 - Managed Accounts' Value
PLANADVISER - July/August 2018 - 53
PLANADVISER - July/August 2018 - Principal Transactions
PLANADVISER - July/August 2018 - Statute of Limitations
PLANADVISER - July/August 2018 - Prohibited Transaction Relief
PLANADVISER - July/August 2018 - C3
PLANADVISER - July/August 2018 - C4
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