When Congress signed a last-minute deal to avoid the dreaded “fiscal cliff,” it ensured that companies across many industries could offer more comprehensive retirement plans to their employees.
The new legislation lets 401(k) participants convert any amount of money in their plan to a Roth 401(k), if such a plan is offered by their employer. The money is taxed when the conversion occurs and employees can withdraw it tax-free when they retire.
Michael Kitces, director of financial planning with Pinnacle Advisory Group in Columbia, Maryland, wrote an Advisor One contribution piece discussing the intricacies of the new legislation and how it would affect workers’ 401(k) plans.
According to Kitces, the new rule simply means that employees can now do intra-plan conversions, whether or not they’re eligible for distribution out of their current plan.
“In theory, the increased flexibility for Roth conversions means more (current workers) will convert their existing 401(k) and other employer retirement plans, which provides a short-term revenue increase for the Federal government (thus, this new rule was actually scored as a ‘revenue raiser’ in measuring the fiscal impact of the provision),” he said.
It’s extremely important for companies to not fall behind on new legislation, especially when it affects the payroll and retirement plans of their employees. Using HR software solutions can ensure that a business remains up-to-date on any changes. That way, workers can continue to take advantage of their organization’s 401(k) benefits.
A qualified HR consultant will be able to find an HRIS software system that caters to a business’ needs. With a comprehensive HRIS system, a company can continue to provide professional value to each employee.