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CCH® PENSION AND BENEFITS — 3/13/07

PSCA survey shows more companies are considering addition of Roth 401(k) plans

A survey of 429 plan sponsors by the Profit Sharing/401k Council of America (PSCA) shows that an increasing number of companies are considering adding a Roth 401(k) feature to their retirement plans. The PSCA attributes this increase to the passage of the Pension Protection Act of 2006 (PPA; P.L. 109-280), which eliminated the Roth 401(k) 2011 sunset provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Only 22% of 401(k) plans surveyed by the PSCA offer Roth accounts, and "anxiety over the Roth 401(k)'s 2011 sunset was a major concern among plan sponsors," according to David Wray, president of PSCA. By contrast, 69% of the companies surveyed stated that, now that the EGTRRA Roth 401(k) provisions have been made permanent, they are more likely to adopt a Roth feature.

The PSCA reports that, currently, small companies are more likely to have Roth 401(k) plans than are large companies, and employees in small plans are more likely to participate in Roth 401(k) plans if their employers offer one. For example, 36.4% of plans with between one and forty-nine participants offer Roth 401(k)s, with 12.8 percent of eligible employees making Roth 401(k) contributions, but only 13.6% of plans with 5,000 or more participants offer Roth 401(k)s, and only 1.3% of those eligible employees make Roth 401(k) contributions.

For more information on this and related topics, consult the CCH Pension Plan Guide.

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