employer contributions Roth employer contributions - Availability & Scope of practice advice

[Miles Leech]

One of our sponsors of a solo 401(k) & PS Plan reached out to me today asking about doing their profit sharing as Roth for the 2026 plan year. I know loosely that Roth employer is possible now under Secure 2.0, but we haven't looked into it much at our firm; it's not something we're planning on advising many employers to do given the added complexity & just isn't something we need to deal with much at our size. I have a few quick questions on how I should handle this:

• Is this something they are allowed to do for solo plan profit sharing contributions (assuming the needed amendment is made), or am I missing something?
• How should I handle talking about this to them, scope-of-practice wise? I can't attest too much to the tax implications of Roth employer, especially in a solo plan. As a TPA/recordkeeper, my gut tells me it's wise to define my scope as being able to tell them what kind of contributions they are allowed to make & how much, as well as processing them, however determining how Roth employer would affect plan compensation (especially as a solo plan), taxes, and any other implications are outside our scope and should be discussed with a CPA. Is this the right place to draw a line, or do I need to spend some time diving into the details of Roth employer & speak to the implications of it?

[Bill Presson]

I’m not aware of anything they can do treating an ER contribution as Roth that they can’t do by electing a Roth conversion. 
 

Unless I hear of some wonderful feature, I’ll continue to have clients do the latter and ignore the former. 

[Miles Leech]

11 minutes ago, Bill Presson said:

I’m not aware of anything they can do treating an ER contribution as Roth that they can’t do by electing a Roth conversion. 
 

Unless I hear of some wonderful feature, I’ll continue to have clients do the latter and ignore the former. 

You do make a good point... most of what I've heard on Roth ER contributions was that they were mostly treated as if a Roth conversion was elected for them as the contribution was made, so outcome-wise it's not a huge difference. I'll likely speak to the client on that this week, Thanks!

[WCC]

See RBG's comment in the below thread. I wasn't paying attention to that until RBG pointed it out.

 

 

[Peter Gulia]

Miles Leech, you mentioned a “solo” plan.

If there is no eligible employee (or deemed employee) beyond the one who desires Roth treatment, consider that a provision for a nonelective contribution to be treated as Roth might be less difficult or burdensome than some fear. Yet, consider:

If the plan is stated using IRS-preapproved documents Journey Retirement Plan Services, LLC provides, can the plan be amended by the relevant remedial-amendment date?

Is the recordkeeper ready to provide the necessary separate-accounting service?

Will the employer engage Journey RPS to do the tax-information reporting needed for a Roth nonelective contribution? For an incremental fee? For an increase in a general fee?

This is not advice to anyone.