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In-plan Roths Catching On

More and more employers are making Roth accounts available within their DC plans — and more employees are taking them up on the offer, according to a new white paper from Aon Hewitt. 

The number of employers that offer Roths within their DC plans more than quadrupled over the last six years, hitting 50 percent by last year. By 2013, 27 percent of plans with a Roth feature allowed in-plan conversions, and another 66 percent said they were at least somewhat likely to allow them. 

Interest in Roths among employees has lagged behind that of plan sponsors, but is growing nonetheless. Aon Hewitt says that in 2012, employee participation in a Roth stood at 8.1 percent; by the beginning of this year, the rate was 11 percent. 

As Aon notes, employee participation in a new plan option takes a while to build. The report’s authors found that the highest participation is at employers that were early adopters, with an average participation rate of 18.3 percent among plans that have offered them for seven years or more. 

As you might expect, new hires and younger workers show the most interest in Roths. The white paper says that among employees in their 20s, almost twice as many contribute to a Roth as those in their 50s and nearly three times as many as those in their 60s. In total, those who contribute to a Roth also defer significantly more than those who do not — 10% compared with 7.5 percent. 

John Iekel is Senior Writer and Editor for the ASPPA Net and NTSA Net portals.