Many employer plan sponsors are expressing a high level of interest in adding Roth 401(k) in-plan conversions as an option to their 401(k) plans in 2013. The recently passed Taxpayer Relief Act of 2012 made it possible for retirement plan participants to convert existing 401(k) plan balances to Roth 401(k) balances, whether or not the participant is distribution eligible.
The benefits? All contributions and earnings that have been in the plan 5 years after the Roth clock starts are distributable tax free (assuming they are distributed due to an eligible event). The cost? It is necessary to pay taxes on any 401(k) balances converted into Roth 401(k) balances in the year of conversion.
