Another Roth 401(k) question

[FJR]

Is anyone out there ready to start administrating the Roth (401(k)? You can't help but pick up any news article and read about the pro's and cons of the Roth, but the articles never mention the fact that Vendors or administrators or even payroll providers are ready. Curious as to what people are doing right now in this area.

Thanks

[RCK]

Our feeling is that we're not going to be a Beta site for anybody. Since there's been no demand from our participants, we're going to sit and watch for at least a year and then reevaluate.

[MWeddell]

Among the major 401(k) recordkeepers, Vanguard is the only one that I'm aware of that claims they can administer the Roth 401(k) feature even without receiving the final regulations. Others are telling their clients that they can't commit to a 1/1/2006 implementation date without receiving more IRS guidance.

[Guest rmeigs]

According to the PSCA Roth 401k survey just released, "The majority (65.2 percent) of respondents indicated that their recordkeeper would be able to handle Roths, while a sizeable 30.1 percent were uncertain. Only 4.7 percent indicated that their recordkeeper would be unable to administer a Roth 401(k)."

Complete survey here.

[FJR]

Doesn't this come down to a few points? Like:

Who has the language to add to the plan document?

Can the Payroll providers accomodate this?

How do you daily recordkeep if the monies have to be seperated? Two omnibus accounts?

Administrativly can the major providers of pension software handle this?

Again, the theory is great, but it seems like this is far from being ready as of 1/1/06

[Locust]

Innovation is not rewarded - HSAs are another example. Recordkeepers/investment companies do not want to incur the costs or take the risk of adding new messy features, while the software vendors are still trying to recoup their original investments. Roth is a good idea, and one that appeals to the company's decisionmakers, but [at least this year] no one is going to lose any business because they don't offer Roth.

[Guest oxdougw]

We try to live by the maxim that Erisa rewards the procrastinator, but I do have a few clients that want to roll out Roths on Jan. 1st. We are confident that the IRS guidance will be that the plan has to be amended by the end of the plan year retroactively. We'll set up a new source in our SchwabRT recordkeeping software and away we go.

There are still some payroll issues our clients will have to work out. If someone wants 5% going to the plan in the Roth, will that be 5% of gross pay, less taxes, so we'll get something less than that. And then what if the match is on the first 5% deferred. Now that person will end up getting a smaller contribution and match than he'd hoped for. Or will the plan receive 5% net after taxes have been withheld.

[mbozek]

I dont understand why roth contributions would be treated any differently than pre tax deferrals to a 401k for withholding purposes. E.g., If pre tax contribution is $100 FICA witholding of $7.65 is taken out of remainder of ee's pay. Roth contributions should be made before reduction for withholing taxes Roth contributions are only a problem if ee contributes 100% of pay which will be reduced for withholding taxes.

[bzorc]

The only benefit from a CPA view is that a high income earner who is in an AMT situation may benefit from having the additional income to report on his/her personal tax return, thus lowering AMT exposure.

From a TPA standpoint, the new DATAIR WINDOWS based version of their recordkeeping software has a Roth 401(k) "bucket". Therefore, if we have a client interested (and none are so far), we would have the ability to recordkeep it. Costs TBD.