ASPPA Makes Suggestions for In-Plan Roth Rollovers

The American Society of Pension Professionals & Actuaries (ASPPA) filed a comment letter with the Internal Revenue Service about in-plan Roth conversions.

Provisions of the American Taxpayer Relief Act of 2012 (ATRA), expanded the availability of in-plan Roth rollovers (IRRs). ASPPA says this has increased the need for additional regulatory guidance regarding several administrative issues related to the implementation of IRRs in eligible plans, and the guidance it suggests will encourage plan sponsors to implement cost-effective ATRA IRR provisions that benefit plan participants, encourage increased plan participation levels and prevent leakage from participants’ plan accounts.   

In its letter, ASPPA recommends that the IRS extend the deadline for the adoption of the “discretionary amendment” that will be necessary to put in effect the ATRA provisions until the later of the last day of the plan year that the amendment is effective or December 31, 2014. ASPPA recommends that the IRS issue guidance clarifying that only fully-vested contribution sources are eligible to be transferred through an IRR, or, alternatively, that a plan sponsor may limit IRRs only to contribution sources that are fully vested.   

ASPPA also recommends that the IRS issue guidance confirming that section 402A(c)(4)(E)(ii) of the Internal Revenue Code of 1986, as amended, permits non-spouse alternate payees and non-spouse beneficiaries to effect a transfer that is treated as an IRR in plans which permit IRRs.  

ASPPA’s comment letter is here.