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More Employers to Add Roth Features to Retirement Plans

While about 49 percent of employers currently offer no Roth provisions, 29 percent say they are likely to add this feature in the next year, according to a new survey.

February 6, 2013
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Lincolnshire, Ill. — Feb. 6

A new survey by human resources consultancy Aon Hewitt found that an increasing number of U.S. employers are planning to add Roth features to their defined contribution (DC) plans in 2013.

This comes on the heels of new legislation that makes it easier for DC investors to convert balances within their savings plan into Roth accounts.

Immediately following the passage of the American Tax Payer Relief Act of 2012 — the deal to avert the so-called “fiscal cliff” — Aon Hewitt conducted a pulse survey of more than 300 individuals representing large U.S. employers to determine the prevalence of Roth accounts and employers' likely actions with respect to their plans over the next 12 months.

According to Aon Hewitt's findings, while almost half (49 percent) of respondents currently offer no Roth provisions, 29 percent of those that don't offer Roth are very or somewhat likely to add this feature in the next 12 months.

Of those new adopters, more than three-quarters (76 percent) will add both Roth contribution and in-plan conversion features.

The survey also found that employers that already have a Roth contribution option are likely to allow employees to make in-plan conversions to Roth accounts. Of those respondents that currently allow Roth contributions but do not offer in-plan conversions, more than half (53 percent) are very or somewhat likely to add this feature in the next 12 months.

For companies that already allow Roth contributions and in-plan conversions, more than three-quarters (79 percent) are very or somewhat likely to expand the eligibility for in-plan conversions, allowing them for previously non-distributable amounts.

Source: Aon Hewitt

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