Administration

Plan Sponsors See Struggles if Moving to Roth-Only Retirement Savings

Forty percent of CIEBA members said it would be very or extremely difficult to explain the Rothification of 401(k) plans to participants.

By Lee Barney editors@plansponsor.com | August 11, 2017

Seventy-eight percent of plan sponsors think that if 401(k) plans moved to Roth-only participant contributions, it would negatively impact participation, the Committee on Investment of Employee Benefit Assets Inc. (CIEBA) found in a membership survey. No members thought it would have a positive impact.

Eighty-two percent said they thought participants would view a change to a Roth-only system very or somewhat negatively.

Sixty-one percent of CIEBA members said they would not be comfortable converting their participants who make pre-tax deferrals into participants who make Roth deferrals without affirmative consent elections. Forty percent of CIEBA members said it would be very or extremely difficult to explain the Rothification of 401(k) plans to participants. Today, about 26% of CIEBA members don't offer a Roth option to their participants. Thus, a movement to an all-Roth platform would mean millions of participants would have to learn about this option, CIEBA says. 

Even when a Roth option is available, CIEBA says, 90% of the dollars deferred in the plans managed by CIEBA members are made through traditional pre-tax deferrals.

Despite their concerns, 56% of respondents said if the system was switched to Roth-only they would be very unlikely to consider eliminating elective deferrals from their plans.

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