Data and Research March 27, 2025

Rollovers Fuel Traditional IRAs, While Contributions and Conversions Boost Roth Accounts

Households with Roth IRAs were found to contribute more to their accounts than were those with traditional IRAs, a new report from the Congressional Research Service found. 

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Rollovers from employer-sponsored retirement plans funded the vast majority of inflows to traditional individual retirement accounts, the Congressional Research Service has reported. 

Some 30.1% of U.S. households had savings in IRAs—including both traditional and Roth IRAs— in 2022, says the CRS in the publication, “Traditional, Roth, and Rollover Individual Retirement Account Ownership in 2022.” 

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The review of IRA ownership is based on data from the 2022 Survey of Consumer Finances, a triennial survey conducted on behalf of the Board of Governors of the Federal Reserve that includes detailed information about household finances.  

The report, written by Elizabeth A. Myers, a CRS analyst in income security, stated that older households were more likely to own IRAs. Among households where the reference persons studied were younger than 35, about 21.8% owned IRAs; compared with 40.2% of households with reference persons aged 65 and older. Older households were also more likely to have changed jobs one or more times compared with younger households, giving them more opportunities to make rollovers into IRAs. 

Overall, the study found some 63% of households with annual income of $150,000 or more, owned IRAs. In households with incomes below $30,000, the figure was 8.8%. 

Citing data from the Investment Company Institute, the report said among households with traditional or Roth IRAs, “those with Roth IRAs were more likely to contribute.” Some 39% of Roth IRA owners made contributions to their accounts in tax year 2022 compared with 22% of traditional IRA owners. 

Additionally, the research found, in 2020, the most recent year for which this data was available, the vast majority of traditional IRA inflows—$594.8 billion or 96.4%— came from rollovers, while $22.1 billion, or 3.6%, came from contributions. Inflows to traditional IRAs totaled $616.9 billion. 

Inflows to Roth IRAs in 2020 were 13.7% of inflows to traditional IRAs. However, CRS reported, unlike traditional IRAs, the majority of money going into Roth IRAs comes from contributions and conversions (from traditional IRAs) rather than rollovers. In 2020, of the $85 billion in inflows to Roth IRAs, $17.5 billion (20.6%), came from rollovers, while $33.0 billion (38.8%) came from contributions and $34.5 billion (40.6%) came from conversions. 

The researcher noted that inflows to Roth IRAs were larger in 2020 compared to previous years, largely due to an increase in the dollar amount of conversions. One reason cited as a driver of the increase was the suspension in 2020 of required minimum distributions. 

“Individuals who had been planning to take RMDs from their traditional IRAs, which would have been included in taxable income, could instead convert those amounts to Roth IRAs,” the author wrote. “While the amount of the conversion would have also been included in taxable income for the year, Roth IRA conversions allow individuals to keep their savings in tax-advantaged retirement accounts indefinitely (because Roth IRAs are not subject to RMDs).” 

Compliance March 26, 2025

Wells Fargo Lawsuit Over Health Plan Dismissed

Former employees alleged that the company had mismanaged its health plan, causing employees to overpay for prescription drugs.

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A U.S. District Judge in Minnesota dismissed a lawsuit filed against Wells Fargo & Company in July 2024 by former employees who claimed that the company mismanaged its health plan and caused employees to overpay for prescription drugs.

Judge Laura M. Provinzino said in the ruling that, under the Employee Retirement Income Security Act, the plaintiffs’ allegations were insufficient to establish Article III standing.

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The former employees alleged in Navarro v. Wells Fargo & Co. that Wells Fargo mismanaged the plan’s employee prescription drugs benefits program, resulting in employees paying “substantially more” in premiums and out-of-pocket costs for certain drugs than they would have absent of Wells Fargo’s “mismanagement.”

The plaintiffs, represented by firms Gustafson Gluek PLLC and Fairmark Partners, LLP, claimed that fiduciaries at the bank agreed to pay its Pharmacy Benefits Manager, Express Scripts, Inc., high prices for generic drugs that were “widely available at drastically lower prices.”

Wells Fargo denied these allegations and filed a motion to dismiss the case in September 2024 for lack of standing or failure to state a claim upon which relief can be granted.

The court found that the former employees could not satisfy Article III’s standing requirements because their alleged harm is “speculative and, ultimately, not redressable.”

In addition, the court said it is speculative that the allegedly excessive fees the plan paid to Express Scripts “had any effect at all” on plaintiffs’ contribution rates and out-of-pocket costs for prescriptions.

“There are simply too many variables in how plan participants’ contribution rates are calculated to make the inferential leaps necessary to elevate plaintiffs’ allegations from merely speculative to plausible,” the court opinion stated.

Although the court sympathized with the plaintiffs and understood its argument about the high cost of prescription drugs, the judge argued that their allegations were too speculative to show concrete individual harm and too conjectural to show redressability.

The complaint was dismissed without prejudice.

In a similar case, current and former participants of the JPMorganChase health insurance plan sued the company earlier this month, alleging the company mismanaged its prescription drug benefit under its health insurance offering.

Under the Consolidated Appropriations Act of 2021, plan sponsors are required to attest that the fees they pay for health care plans are fair and reasonable. As a result, it is important that plan sponsors apply a fiduciary process when evaluating their health plans, including pharmacy benefit managers, as well as remain aware of any pending litigation involving the providers.

The Federal Trade Commission has also released two interim reports, as well as filed an administrative lawsuit against the “big three” PBMs, arguing that these middlemen have opaque business practices and mark up the prices of prescription drugs.

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