The IRS has resolved some of the uncertainty surrounding in-plan Roth rollovers in Notice 2013-74.  Even though it is late in 2013, employers can still allow Roth contributions and in-plan Roth rollovers in 2013 without adopting plan amendments until the end of 2014.

1.  What Is an In-Plan Roth Rollover?

Roth contributions have become an increasingly common feature in 401(k) plans.  By one estimate, approximately half of the plans sponsored by large employers permitted Roth 401(k) contributions as of the beginning of 2013, and many more were considering adding the feature in 2013.

However, few plans permit participants to take existing 401(k) plan balances and convert them into Roth amounts by paying taxes on the amount converted — so-called “in-plan Roth rollovers.”  Although plans have been permitted to allow in-plan Roth rollovers since the 2010 plan year, the limited nature of these rollovers (only amounts that were already eligible to be distributed from the plan could be rolled into a Roth) made them less attractive to plan sponsors and participants.

This limitation changed as of January 1, 2013, and plans are now permitted to allow in-plan Roth rollovers of additional amounts.  However, the uncertainty regarding what could be rolled over and the rules for administering these rollovers kept many plan sponsors from incorporating this feature.  The IRS has now resolved some of this uncertainty. 
Continue Reading New Guidance on In-Plan Roth Rollovers (Finally!)