ASPPA Applauds Passage of Roth Conversion Provision

| September 16, 2010 | 2 Comments

Proposal Permits Roth Conversion
within 401(k) Plans

ARLINGTON, VA (September 16, 2010) The following is a statement from Brian H. Graff, executive director/CEO of The American Society of Pension Professionals & Actuaries (ASPPA) in response to the United State Senate’s passage of H.R. 5297 that allows distributable 401(k) account balances to be converted to Roth accounts within a 401(k) plan.

“If a provision passed today by the Senate becomes law, workers won’t have to give up the advantages of an ERISA-protected 401(k) plan to take advantage of special 2010 Roth conversion rules.

Under current law, the conversion to a Roth account is only available by moving money from a 401(k) plan to a Roth IRA. Income tax on the transferred amount usually would have to be paid in the year of conversion, but a special rule allows tax on amounts converted in 2010 to be deferred until 2011 and 2012. The new provision permits a 401(k) plan to handle Roth conversions within the 401(k) plan—allowing participants to take advantage of Roth conversion rules without forfeiting the protection and advantages of holding savings in an employer-sponsored retirement program.

Without this proposal, many plan sponsors and participants were considering changes to permit workers to pull their retirement assets out of the plan. ASPPA has voiced public concern about the potential for leakage out of retirement accounts for workers who had no intention of converting to a Roth account.

ASPPA has worked closely with several members on the Roth conversion provision and applaud the Senate for recognizing how this key change will preserve retirement savings. We urge the House to pass the Small Business Jobs and Credit Act of 2010 (H.R. 5297).”


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