Tax Relief Bill Brings Changes To In-Plan Roth Conversions

(Benefits Update, No. 1, February 2013)

On January 2, 2013, President Obama signed the American Taxpayer Relief Act of 2012 into law, thus ending (for now at least) the crisis created by the so-called "fiscal cliff."  One of the law's provisions offers more flexibility for retirement planning for participants in 401(k), 403(b) and 457(b) plans.   

Prior to the new Act, in-plan Roth conversions were available only with respect to amounts under a plan that were otherwise eligible for distribution, meaning a participant had to be otherwise eligible for a plan distribution (such as over age 59 ½) in order to make an in-plan Roth conversion.  The new law expands the in-plan Roth conversion provisions to include any vested amount under the Plan, whether or not the participant is otherwise eligible for a plan distribution.