MMC Benefits Handbook
In-Plan Roth Conversions
An in-plan Roth conversion allows you to convert after-tax account balances into in-plan Roth conversion accounts. When you make an in-plan Roth conversion, you will immediately pay taxes on the investment earnings on the contributions converted. However, you will pay no taxes when you take a qualified distribution from your in-plan Roth conversion accounts (as described in "Taxes on Distributions from In-Plan Roth Conversion Accounts").
The in-plan Roth conversion would consist of your after-tax accounts plus investment earnings on those contributions. For this purpose, your "after-tax accounts" include after-tax contributions, any after-tax rollover account and any Pre-1987 after-tax account, (if you previously participated in the Marsh & McLennan Companies 401(k) Savings & Investment Plan) but exclude all other contribution types, including those that may have an after-tax character, such as Roth 401(k), Roth catch-up and Roth rollover contributions.
After the conversion, the converted amounts will be included in up to two in-plan Roth conversion accounts – one account will include any converted after-tax rollover amounts, and the second account will include any other converted after-tax amounts. These accounts will have the same distribution rights but will be displayed separately for recordkeeping purposes.
You can make an in-plan Roth conversion if you are an active or terminated employee (including if you are on leave of absence or long term disability) with after-tax accounts. Surviving spouses and current and former spouses who are alternate payees under a Qualified Domestic Relations Order (QDRO) are also eligible to make an in-plan Roth conversion. However, non-spousal beneficiaries and non-spousal alternate payees are not eligible for an in-plan Roth conversion.
Considering In-Plan Roth Conversion
An in-plan Roth conversion is a personal financial decision that only you can make. Some things to consider include whether you expect to:
- Keep your after-tax savings invested for the long-term. Once converted, your after-tax contributions may only be distributed without adverse tax consequences upon a qualified distribution.
- Be in a higher tax bracket when you retire.
Converting funds held in an after-tax account to in-plan Roth conversion accounts is not appropriate in all situations or all circumstances. You should consult with your tax advisor or financial professional to help you determine if this feature is appropriate for you.
Difference Between Roth 401(k) Contributions and In-Plan Roth Conversion
The difference between an in-plan Roth conversion and Roth 401(k) contributions is Roth 401(k) contributions are contributions you can elect to make with after-tax dollars which are kept in a Roth 401(k) account. An in-plan Roth conversion is an opportunity to convert your other after-tax accounts to Roth contribution status to take advantage of the tax-saving features of in-plan Roth conversion accounts. It's not an initial contribution type like Roth 401(k); it's an election you may make on money that has already been contributed on an after-tax basis.
Each in-plan Roth conversion will be processed pro-rata from the various investment funds in the after-tax accounts. You can elect to include or exclude the portion of your after-tax accounts invested in the Marsh & McLennan Companies Stock Fund from the in-plan Roth conversion. For more information regarding the potential tax consequences of including Marsh & McLennan Companies Stock as part of an in-plan Roth conversion, see "In-Plan Roth Conversions" that Include Marsh & McLennan Companies Stock."
When you make an in-plan Roth conversion, the converted funds will remain invested in the same funds they were in before the conversion. A request to convert your after-tax accounts to in-plan Roth conversion accounts will not change those funds' underlying investments.