Roth Profit Sharing Plans?

[DPSRich]

Can an Employer convert an existing Profit Sharing Plan to a Roth Profit Sharing Plan? No 401 (k) deferrals, possibly Profit Sharing contributions.

Any help would be appreciated.

Thanks DPSRich

[ETA Consulting LLC]

Nope.

Good Luck!

[C. B. Zeller]

What do you mean by "Roth profit sharing?"

[Mike Preston]

The Easter Bunny, Santa Claus and a Roth Profit Sharing plan all walk into a bar....

[QDROphile]

And they are barred.

[DPSRich]

On 12/15/2018 at 6:16 PM, QDROphile said:

And they are barred.

 

On 12/15/2018 at 1:15 PM, ETA Consulting LLC said:

Nope.

Good Luck!

Thank you everyone, just as thought.

[Larry Starr]

On 12/15/2018 at 1:16 PM, DPSRich said:

Can an Employer convert an existing Profit Sharing Plan to a Roth Profit Sharing Plan? No 401 (k) deferrals, possibly Profit Sharing contributions.

Any help would be appreciated.

Thanks DPSRich

As everyone has noted, the answer is certainly NO.  But the reason, while mostly obvious, should be noted:  It is ONLY deferrals by employees (that is, 401(k) type deferrals) that can be of the Roth flavor.  Employer contributions to a profit sharing plan are NEVER Roth-ized.

[justanotheradmin]

While I agree that the answer to the original question is No, I disagree that employer contributions can never be "Roth-ized"

Plenty of 401(k) plans allow for Roth deferrals, and under the Roth conversion rules (not the old Roth rollover rules), those plans could allow participants to convert existing balances to Roth. This can include employer money. If done as a Roth conversion, the money retains the characteristics and restrictions of the source money. So while I don't care for it, we do occasionally see a participant with Roth Profit Sharing, or Roth Match, etc. 

But perhaps the distinction is those occur at the individual participant's request, the plan has not made a carte blanche change to a source for all participants. 

I rarely see Roth conversion requests, so perhaps the rules have changed, but that's how I remember them working with the rules came out for Roth conversions. 

[Lou S.]

On 12/18/2018 at 1:59 AM, Larry Starr said:

As everyone has noted, the answer is certainly NO.  But the reason, while mostly obvious, should be noted:  It is ONLY deferrals by employees (that is, 401(k) type deferrals) that can be of the Roth flavor.  Employer contributions to a profit sharing plan are NEVER Roth-ized.

I don't think that's what she meant, though I could be wrong.

I could be wrong but I think the question was could profit sharing only plans have in-plan ROTH conversions of assets without allowing employee deferrals. And the answer to that as has been stated is NO.

 

[Larry Starr]

6 minutes ago, Lou S. said:

I don't think that's what she meant, though I could be wrong.

I could be wrong but I think the question was could profit sharing only plans have in-plan ROTH conversions of assets without allowing employee deferrals. And the answer to that as has been stated is NO.

 

You may be right; so often questions posted on this site are abundantly unclear! I probably should have said "it is only employees who can convert their account to Roth accounts. Employer contributions are always before tax contributions".

[Lou S.]

Just now, Larry Starr said:

You may be right; so often questions posted on this site are abundantly unclear! I probably should have said "it is only employees who can convert their account to Roth accounts. Employer contributions are always before tax contributions".

Yeah sometime ambiguity in the question makes it tough. I'm sure I've been guilty of doing that a time or two myself.

But I have had clients ask if they could make a ROTH Profit Sharing contribution so they didn't have to pay taxes on it only to have to tell, them no it doesn't work like that, if only it were so easy.

 

[AndyH]

17 hours ago, Lou S. said:

But I have had clients ask if they could make a ROTH Profit Sharing contribution so they didn't have to pay taxes on it only to have to tell, them no it doesn't work like that, if only it were so easy.

 

That would be a Roth Profit Sharing Plan!  Only Santa Claus and the Easter Bunny have those!