In-Plan Roth Conversions Now Possible Without a Distribution Event
The American Taxpayer Relief Act (the “fiscal cliff” bill) included a little-publicized provision that allows defined contribution plans to permit participants to convert pre-tax accounts to Roth (post-tax) accounts. Importantly, the participant does not need to experience a distribution event (such as termination of employment, reaching a certain age, etc.) in order to do this. If a plan sponsor would like to allow these conversions, the plan must be amended. The IRS intends to issue further guidance on how these conversations should be administered.