Roth 401(k) Fees

[Archimage]

Is anyone planning on charging more in fees to plans that add the Roth 401(k) provisions? I am looking at this and I don't think it will actually cost me more to administer or recordkeep the plan due to the software handling it. Something I may be missing? Any ideas or comments are appreciated.

[pmacduff]

Archimage - one of the things we're addressing is the distribution issue since a participant can't roll Roth $ into a traditional IRA. Plus there may be participant who will choose to contribute both before tax and after tax $.

In the "old days" where you had one rollover distribution to process if the participant left, you will now have at least 2, one to the Traditional IRA and one to a Roth.

It may not seem like much of an issue, but in our small operation where we process what seems like a "gazillion" distributions, it's just going to add to the burden of distribution processing. In those plans that allow distribution upon termination, we could end up doing four distributions if the participant is contributing right up until their term date.....whew!!

You're right about the administration itself or recordkeeping, though not being too difficult. I figure you just add a source and track it separately.

[rcline46]

So you think admin is a snap? Consider:

Failed ADP test - which do you give back? Client option or plan specified?

Loan default when source is ROth - not a qualified distribution - earnings are taxable.

Failed 402(g) and not returned prior to April 15th - becomes taxable.

Oh sure, no additional administrative burden. NOT!!!!

[namealreadyinuse]

I agree. After the new regs, I have heard of TPAs dropping out of prior agreements to handle Roths, not pick up the service.

[Archimage]

Good point on the distributions. I had not thought of that. The loan issue is handled by the software so I am not concerned with that. The ADP test may become an administrative burden getting the election form from the participant.