Thursday, February 7, 2013

New Trends in the 401(k) World

Shortly after the passage of the American Taxpayer Relief Act of 2012 (ATRA), Aon Hewitt did a pulse survey of more than 300 large employers (presumably from their client base, but the press release doesn't seem to specify) on 401(k) plans. Here were some of their key findings:

  • 49% of respondents currently do not offer Roth provisions
  • Of those, 29% are very likely or somewhat likely to add Roth provisions in the next 12 months (this would bring the percentage who do not offer Roth provision down to about 35% of the total)
  • Of the new adopters, about 76% will add in-plan conversion (from traditional to Roth) features
  • Approximately 53% of companies that currently allow Roth contributions but do not currently offer in-plan conversions will begin to allow them
Personally, I am pleased to see this trend. For the life of me, though, the only good reasons I can see to not offer both of these features are these:
  • HR has too many other things on their plate and implementation of these is not a high enough priority to implement in 2013
  • The company is particularly paternalistic and worries that because Roth accounts have earlier distributable events than traditional 401(k) accounts that participants will not use them for retirement
  • Employees have not asked for them (I think this is not a good excuse because many employees will not have heard of the opportunity)
  • Employers have not heard of these changes (shame on them, they should be reading this blog, of course)
The employer-sponsored retirement plan world has changed from one largely of employer responsibility to largely one of employee responsibility. For employees to someday retire, since very few who don't save in employer-sponsored retirement plan save elsewhere, those employees will need to begin saving at young ages and save responsibly and consistently. The more tools they have available to them, the more likely they are to do it, and that is good for our future.


  1. Interesting insight on how the fear of early distributions might inhibit some from offering the Roth option. I had never thought of that. Thanks for sharing - another good post!

    1. Thanks Brian. As you know, I write both for my own entertainment and to make me think, but also to hopefully educate my readers and to make them think.