In-plan Roth conversions

[Guest Sieve]

Friday's IRS Notice 2010-84 (http://benefitslink.com/IRS/notice2010-84.pdf) eliminates the need for an immediate amendment to allow in-plan Roth conversions. The amendment is not necessary, generally, until 12/31/11.

But I can't tell from Q&A-17 and its cross reference to Q&A-4 whether that also eliminates the need for an amendment allowing an in-service age 59-1/2 distribution (for a plan that does not have one), or whether it just eliminates the need for an in-service distribution amendment which limits the in-service distribution to Roth conversions only. (On a practical level, that may make no difference. You could always change a limited conversion-only distribution--for which an amendment is not needed--to a full-blooded distribution at a later date.)

Also, if a plan does not already contain Roth accounts, doesn't Q&A-20 require some kind of notice to participants explaining the addition of Roth accounts (even though an amendment is not necessary) so that participants can defer into the Roth in addition to converting into a Roth? And, if a Plan is hard-wired for quarterly deferral modifications, wouldn't you need to amend the plan to permit a deferral modification before 1/1 to permit Roth deferrals to actually be able to occur before 1/1 in order also to permit conversions before 1/1?

Thoughts? (I've also sent an e-mail to the author of the Rev. Notice.)

[masteff]

1) A-17, first sentence, you might try re-reading w/ some added emphasis on the words "any" and "pursuant". The second sentence begins w/ the words "for example" so that sentence is inclusive but not exclusive.

2) I'd certainly think SMMs all around. And yes, I'd agree that plans w/ restricted deferral modification rights (e.g. quarterly) would need a special election opportunity to enable a 2010 rollover ("eligible employees are given an opportunity to elect on that date").

[Guest Sieve]

masteff --

Would you agree that the amendment necessary to add a special deferral modification date can also be delayed based on that first sentence of A-17 (since the amendment "is adopted pursuant to § 2112 of SBJA")?

[masteff]

Yep, I'd agree w/ that analysis. Lump it in the same amendment to add the Roth account feature and it's hard to deny the connection.

Edit: in fact, the second sentence of A-17 has a phrase that could be extended: "applies to a plan amendment that permits elective deferrals under the plan to be designated as Roth contributions". Your "special deferral modification date" certainly seems close enough to that.

[Guest Sieve]

Thanks for confirming (that at least one other person on this board has as twisted a mind as I do . . .)