Fiscal Cliff Legislation Presents Opportunity for Retirement Plans

The fiscal cliff legislation passed by Congress last week contains a potential planning opportunity for retirement plan participants. Retirement plan sponsors of 401(k), 403(b), and 457(b) plans may now allow participants to convert before-tax retirement savings into Roth after-tax savings (Roth conversions). Previously, a plan could only allow Roth conversions when amounts were otherwise available for distribution or withdrawal (e.g., age 59 ½ for salary deferrals). Amounts converted to Roth after-tax savings are taxed in the year of conversion but, subject to IRS timing rules, are distributed with earnings tax free. Roth conversions are only available if a plan allows Roth after-tax deferrals.

For more information about Roth conversions or any employee benefit issues, please contact a member of our Employee Benefits Group or call 208.344.6000.