The Small Business Jobs Act of
2010 added a provision that 401(k) plans that have a Roth deferral
option can permit in-plan conversions of non-Roth funds to the Roth
account. The IRS has issued guidance on the procedures that
plans should use if the plan sponsor elects to add this feature.
(Notice 2010-84).
In general, this provision will
allow a participant to convert funds that are currently
distributable into a Roth account within the plan in 2010. The
taxes due on the converted amounts can be paid with regular income
taxes for 2010 or deferred into 2011 and 2012 tax years. There
is no mandatory income tax withholding requirement on these
funds.
Retirement plan sponsors who wish
to provide this option will need to amend their plans by December
31, 2011. However, given that this in-plan Roth rollover must
happen by December 31, 2010, plan sponsors are advised to
promptly confer with their Larkin Hoffman legal counsel regarding
the appropriateness of this provision for their plan.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.



