Time for a 'Roth Review' With Retirement Plan Clients
Secure 2.0 "provides new mandatory and new optional Roth issues to consider," ERISA lawyer Brad Campbell says.
It’s time for advisors to schedule a Roth conversations with each of their retirement plan clients, according to ERISA attorney Brad Campbell with Faegre Drinker.
Why? Because the Setting Every Community Up for Retirement Enhancement (Secure) 2.0 Act “provides new mandatory and new optional Roth issues to consider,” Campbell, a former head of the Labor Department’s Employee Benefits Security Administration, said on the law firm’s recent Inside the Beltway webcast.
“Every plan needs to have a Roth review this year,” Campbell said.
In separate comments to ThinkAdvisor, Campbell relayed that before Secure 2.0, “plans had the option of allowing employees to elect that employee contributions be made on a Roth basis. Some plans adopted this provision, most did not.”
Secure 2.0 “expanded that to give plans the option to allow employees to elect to receive both employee and employer contributions on a Roth basis,” Campbell said.
In addition, Secure 2.0 “mandated that employees receiving more than $145,000 in FICA wages could only make catch-up contributions on a Roth basis — no traditional, pretax catch up for these workers is allowed after Jan 1, 2026 (the statute says Jan.1, 2024, but the IRS guidance permits an additional two-year transition period),” Campbell explained.
In other words, “it is time for plans to revisit Roth, and decide if they want to add the optional provisions because they are going to have to address the mandatory provision,” Campbell said.
Advisors, Campbell said, “are going to play a key role in helping plans assess how to address these Roth issues.”
Pictured: Brad Campbell, attorney with Faegre Drinker