In Notice 2013-74 , the IRS extended the deadline to adopt a discretionary plan amendment to allow in-plan Roth rollovers in 2013 of amounts in a plan that could not be distributed to the participant:
- 401(k) and governmental 457(b) plans – to the later of the last day of the first plan year in which the amendment is effective or December 31, 2014. Safe Harbor 401(k) plans have until December 31, 2014, to add the amendment effective for 2013 and 2014.
- 403(b) plans – to the later of the last day of the first plan year in which the amendment is effective or the end of the plan’s remedial amendment period.
The amendment’s effective date must be the date the plan first allows the designated Roth account transactions permitted by the amendment.
The extended amendment deadline also applies to related amendments that permit:
- in-plan Roth rollovers of some or all otherwise distributable amounts,
- designated Roth accounts to accept rollovers, and
- elective deferrals under the plan to be designated as Roth contributions.
Rules for in-plan Roth rollovers of otherwise nondistributable amounts
- The plan must separately account for any in-plan Roth rollovers of otherwise nondistributable amounts.
- The amounts rolled over remain subject to the distribution restrictions that applied to them before the in-plan Roth rollover.
- The rollover must be direct; 60-day rollovers are not permitted if the amount was otherwise nondistributable.
- Tax withholding does not apply.
Amounts now eligible for in-plan Roth rollovers
Regardless of the participant’s age, a plan may permit in-plan Roth rollovers of:
- elective deferrals
- matching (including safe harbor 401(k) matching) contributions
- nonelective (including safe harbor 401(k) nonelective) contributions
Adding or removing Roth provisions
A plan isn’t required to offer designated Roth accounts or in-plan Roth rollovers. A plan may also limit the types and amounts of contributions eligible for Roth rollovers and the frequency of rollovers. For example, a plan could provide that only otherwise distributable amounts are eligible for in-plan Roth rollovers.
A plan may also discontinue the availability of in-plan Roth rollovers. An employee’s ability to make in-plan Roth rollovers is not protected by the anti-cutback rules in Internal Revenue Code Section 411(d)(6).
Background on in-plan Roth rollovers
Since 2010, plan participants have been able to roll over certain amounts in a 401(k), 403(b) or governmental 457(b) plan to a designated Roth account in the same plan. But the amounts rolled over had to be eligible for distribution from the plan.
Beginning in 2013, a plan may also allow in-plan Roth rollovers of amounts that aren’t otherwise distributable (Internal Revenue Code Section 402A(c)(4)(E), as amended by the American Taxpayer Relief Act of 2012).