The Principal is Ready for Roth
Able to process in-plan Roth conversions for participants December 16, 2010
December 9, 2010 (Des Moines, Iowa) - The clock is ticking for retirement plan sponsors who want to give participants in 401(k) and 403(b) plans the option of converting non-Roth account balances to an in-plan Roth account.
Sponsors have until December 15 to request the change in writing in order for participants to take advantage of special tax benefits for conversions made in 2010. The Principal Financial Group® will have systems in place to process plan changes and participant requests beginning December 16, 2010.
“With the IRS unveiling final guidance on the in-plan Roth conversions, we’re hearing from more sponsors who want to allow the conversion option,” said Joni Tibbetts, vice president of retirement and investor services at The Principal®. “We’re ready to help sponsors with plan amendments and we’ll be ready for participants who want to make the conversion.”
The in-plan Roth conversion provision was part of the Small Business Jobs and Credit Act of 2010 signed into law Sept 27. The law enables in-plan Roth conversions of non-Roth account balances to a designated Roth account within the plan if the participant has retirement funds that qualify as an eligible rollover distribution as defined by the plan.
Sponsors must provide a signed letter of intent to amend their plan for the in-plan Roth conversion by December 15 or participants will miss the opportunity to spread the tax payments on the conversion over two years. Participants can either claim as income from the conversion on their 2010 tax return or split it between their 2011 and 2012 tax returns.
“Whether to make an in-plan Roth conversion is a highly individualized decision for participants and we’d encourage them to consult their tax advisor,” said Tibbetts.
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About the Principal Financial Group
The Principal Financial Group® (The Principal ®) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance, and banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $305.7 billion in assets under management and serves some 18.9 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG.
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- "The Principal Financial Group" and "The Principal" are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
- As of Sept. 30, 2010.