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Growing interest in Roth 401(k)s


While more U.S. employers intend to offer Roth 401(k) savings plans, only a small percentage of employees now in the plans are making contributions, according to a new survey.

Currently, just 22.4% of employers have added a Roth feature to their 401(k) plans, the Profit Sharing/401k Council of America found in its survey of 429 employers. Such contributions are made on an aftertax basis, but the contributions and investment income are not taxed when distributed so long as certain conditions are met.

Roth 401(k) plans were authorized under a 2001 law that allowed companies to offer them starting Jan. 1, 2006, but also barring new contributions after Dec. 31, 2010. Initially, companies held back on adding the feature until Congress made the plans permanent, which legislators did last year as part of a broader pension funding reform bill.

Now, though, 61% of employers that do not offer a Roth feature in their 401(k) plans are either considering or are planning to do so, according to the Chicago-based PSCA.

Among those employers with a Roth feature in their 401(k) plans, just 7.9% of eligible employees made Roth contributions in 2006—the first year such contributions were allowed.