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How Do Plan Sponsors Feel About a Possible Roth ER Contribution?

DC Plan Design

Last week we asked NAPA-Net readers to weigh in on a provision in the Enhancing American Retirement Now (EARN) Act that would permit treating employer contributions as after-tax Roth contributions—but what do plan sponsors think?

That’s right, one of the revenue-raising provisions currently in the EARN Act would permit an employee to elect to treat employer matching and other employer contributions as after-tax Roth contributions. Of course, being in that legislation now—and making it into the final (not to mention the inevitable reconciliation with the version passed by the U.S. House of Representatives)—isn’t a sure bet. But the provision is projected to raise some $12 billion in revenue for the government (people opting to pay taxes now with the embrace of a Roth alternative)—and so… well, you just never know.

Now, we did ask NAPA-Net readers what they thought plan sponsors would think/do—and it was a mixed response (you can read about it here). But—separately—we also asked members of the Plan Sponsor Council of America (PSCA) their opinion on the provision.  

As for their take: Just 14% of companies said they would, with 21% saying maybe, though the comments on this provision run the gamut from “it’s a great idea” to “no way,” the main concern seems to be the additional administrative burden in implementing such a provision. 

We also asked PSCA members if they thought there would be much participant interest in treating employer contributions as Roth contributions. Eleven percent said there would be a lot of interest; 30% said they thought there would be some interest; and 37% said “perhaps a little” interest.

All in all, the plan sponsor perspective(s) seemed to be a bit less enthusiastic than the NAPA-Net audience regarding the provision.  

You can check out the PSCA results here.