PPA Amendments

[ERISA-Bubs]

We have already amended several plans for PPA, but we recently discovered that we did not include the language regarding rollover to Roth IRAs. Is this language necessary? Will we have failed to properly amend the plans if we do not include it? Can we simply handle this by including Roth IRA rollover language in the plan's rollover documents?

[Lou S.]

Are you talking about the "In Plan Roth Conversion Option" from last year?

If so, you have until 12/31/2011 to formally adopt such amendments retroactive to when you added the feature, presumably in 2010.

We are going thought that right now with the plans that added it last year.

[ERISA-Bubs]

No, I'm not referring to in-plan Roth -- I'm refering to the external conversion to a Roth IRA

[Lou S.]

I'm not sure if it is required but our PPA amendment from a large national document provider contained the following provision -

Roth IRA rollover. For distributions made after December 31, 2007, a participant may elect to roll over directly an eligible rollover distribution to a Roth IRA described in Code §408A(b).

If they included it, my quess is the IRS was requiring it.

[Tom Poje]

the comment we received from our document provider was

The option for in-plan Roth rollovers is entirely optional. If the plan chooses not to permit in-plan Roth rollovers at this time, the plan can later be amended to provide for in-plan Roth Rollovers - generally by the end of the plan year in which the rollovers are first allowed. Note that safe harbor plans may not retroactively amend for in-plan Roth Rollovers after December 31, 2011 but may only amend prospectively for a future plan year (this is due to the annual/safe harbor notice requirements).

[Lou S.]

Tom, his question wasn't about in plan conversions though which are clearly optional. But thanks for the info on safe-harbor plans not being allowed to add mid-year. Though I really think the IRS has gone off the deepend with restrictions on changes to safe-harbor plans, though that is a whole seperate issue.

It is specifically about allowing a direct rollover of an eligible rollover distribution from a qualified plan to a ROTH-IRA, even if the funds being rolled over are pre-tax.

[masteff]

Looking at notices 2008-30 and 2009-75, the IRS doesn't clearly call for an amendment so I'd say it depends on existing plan language relating to rollovers and direct rollovers. PPA Section 824 amended the definition of qualified rollover contribution in §408A. If your plan is too narrow (such as saying "IRA" versus "eligible retirement plan") then you might need to amend.