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Employer plan offers both trad & roth 401k options, but won't allow me to convert?

It is my understanding that Taxpayer Relief Act provided that employees should be able to convert w/in the plan if both options were offered. I keep getting the runaround from HR, plan provider, and plan advisor. What's the real holdup? Is it that they don't want to do the paperwork?

Jun 19, 2014 by D from Townsend, WI in  |  Flag
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Hi Denise,

Your plan had to be "amended" to allow for the conversion privilege afforded by the TRA. Ask for a Summary Plan Description for your plan and see if the SPD mentions the ROTH conversions. Prior to the TRA participants age 59-1/2 and over could convert to a ROTH if the plan allowed. The TRA benefited participants under the age of 59-1/2.

Even if your plan sponsor wanted to take advantage of the TRA opportunity and amend the plan I know almost all plan document providers would not offer the amendment until they received guidance from the IRS (it's one thing to have Congress say you can do something. It's another to try to do it before the enforcement body provides their interpretation of what Congress is allowing). But this guidance became available early this year so by now your plan's document provider should have the ability to amend the plan if they didn't before.

If a conversion is in your best interest I would push the issue with your plan administrator. This person usually isn't in the HR department. Most likely finance.

Hope this helps.

Comment   |  Flag   |  Jun 20, 2014 from Woodbridge, VA

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Without knowing more about your company or your plan, it’s hard to provide you with the answer to the question you pose. To allow you to convert they may have to amend their plan, which they may be reluctant to do if there is not a big demand for it. There are a few things you may want to consider. See if you can change your election from making future 401(k) contributions to the Roth plan instead of the regular plan. Some 401(k) plans allow you to take “in-service” distributions. If your plan does, you can roll your regular 401(k) assets into a rollover IRA and then covert those assets into a Roth IRA. That solves your problem and does not require your employer to change their plan description.

Comment   |  Flag   |  Jun 20, 2014 from Suffolk, VA

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Denise, every plan has a Third Party Administrator, or TPA, which, as the name implies, administers the plan. The TPA needs to ‘amend’ the plan to allow it to make the conversions. So my recommendation is to call HR and find out who the TPA is, cut out the parties that don’t really know, and call them directly, and find out the status of the amendment. Further, the TPA is the party that would actually process any conversion.

Comment   |  Flag   |  Aug 20, 2014 from Delray Beach, FL

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