Are we Rothing the Employer Contribution Yet?

Sponsored by: MFS Investment Management 

Fifteen percent of plan sponsors have added the optional provision of SECURE 2.0 to allow participants to elect Roth treatment of employer contributions and a quarter of plans are actively considering this provision. Nearly forty percent have not and will not be implementing this provision and the rest are unsure. Allowing Roth treatment of employer contributions has been the most popular of the optional provisions since SECURE 2.0 was signed into law and though a few more have implemented it than said they would a year ago, many more have definitely decided against it. Though many plan sponsors like this provision in theory, and the recent guidance has made it more attractive to offer, many don't want the added administrative complexity, especially if they already allow in-plan Roth conversions. Comments follow.

                                                                   Feb 2023         Feb 2024

Definitely will add/have added              11.3%              14.7%

Likely will/Still considering                      25.8%              23.3%

Unlikely                                                            23.4%              -

Definitely Won’t                                            8.9%                37.9%

Unsure                                                              30.6%              22.4% 

Other                                                                    -                       1.7%

Comments:

• A few years ago we added the ability to do in-plan Roth conversions in our Plan. Our participants can choose to convert any source (including employer match) to Roth so we do not see a need to implement this optional provision allowed by SECURE 2.0.
• Administratively complex and unnecessary feature when employee can use Roth conversion
• Adoption of Roth is still a minimal part of our overall population.  As such, don't see that it would be a popular addition for the corporate contribution without further education.  Also need to better understand tax implications to employees at the time of the contribution to make a better pitch for this change.
• Depends if payroll provider can handle tax treatment.
• Desire to minimize complexity
• Do not want to add another layer of complexity to plan administration. Allowing Roth employee contributions is sufficient.
• Just added ROTH to our plan options in 2024
• Need to see how challenging it will be administratively with our current TPA
• No intention to do so at this time.
• Not considering due to additional tax burden on employees
• Not currently considering, but unsure if this would change in future
• Not unless/until mandated by law.
• Not until it is mandated; however, it will be a welcome change for many HCEs who want to pay taxes now.
• Our recordkeeper is not yet set up to allow it. We will likely allow for Roth treatment of employer contributions once we are able.
• Participants can already do this by means of an In Plan Roth conversion.
• Pretty sure it will be a no but not confirmed yet.
• Probably not until it becomes mandatory for certain individuals.
• really need to see the options and impact to forfeiture accounts as well as if HRIS will support.
• Roth ER contributions is an unnecessary administrative burden.
• Still awaiting guidance on whether Roth employer contributions will be considered income to employee to be a qualified business expense that is deductible to the employer.
• too much trouble administratively
• Unnecessary administrative complication - we allow in-plan Roth Rollover and that suffices.
• Very unlikely to do this until all details are worked out and payroll and plan recordkeepers have  built out fully all the required capabilities.  Making changes to payroll is super challenging.
• Want to see how the vendors adopt this change before considering
• we allow Roth in plan roller funds for the EE and that is new and probably all we are considering now.
• We are not considering adding it this year, but may do so in 2025 or prior to any requirement made in 2026 or thereafter.
• We are waiting for guidance from our Plan provider whether this will be available for our members. Our Plan provider is waiting for updated guidance from the IRS.
• We currently don't have employer contributions so it's not a current consideration.
• We have employee interest to adopt Roth match, however, we are concerned that our non-fully vested participants will be confused and frustrated. Ideally, we will be able to move to immediate vesting and then we will consider adopting this feature.
• We take a wait and see approach to changes. I like the idea, though.
• Will be doing a review of our plan sometime during 2024, we moved to new vendors this year.
• With the guidance, has made this option more attractive to offer, but still deciding whether to do so or not.