Survey Slow-Starting Roth 401(k)s Could Pick Up

U.S. employers plan to offer Roth 401(k) savings plans, only a small percentage of employees now in the plans are making contributions, according to a new survey.

Currently, just 22.4 percent of employers have added a Roth feature to their 401(k) plans, the Profit Sharing/401(k) Council of America found in its survey of 429 employers. Such contributions are made on an after-tax basis, but the contributions and investment income are not taxed when distributed so long as certain conditions are met.

Roth 401(k) plans were authorized under a 2001 law that allowed companies to offer them starting January 1, 2006, but also barred new contributions after December 31, 2010. Initially, companies held back on adding the feature until Congress made the plans permanent, which legislators did last year as part of a broader pension funding reform bill.

Now, though, 61 percent of employers that do not offer a Roth feature in their 401(k) plans are either considering or are planning to do so, according to the Chicago-based Profit Sharing/401(k) Council of America.

Among those employers with a Roth feature in their 401(k) plans, just 7.9 percent of eligible employees made Roth contributions in 2006—the first year such contributions were allowed.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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