Your financial well-being is important. That’s why Cooper is pleased to be enhancing your retirement savings plan options. In May, we introduced Roth contributions for our team members who have Fidelity retirement savings plans through Cooper (see here).
Effective July 29, 2024, Cooper team members can participate in Roth in-plan conversions through Fidelity as part of our Thrive 365 financial well-being initiative.
What is a Roth in-plan conversion?
A Roth in-plan conversion allows you to transfer a rollover-eligible distribution (assets) directly to a Roth account within the same plan. Rollover-eligible assets include pre-tax contributions you have made to your current Fidelity workplace savings plan, pre-tax contributions Cooper has made to your workplace plan, and/or any pre-tax contributions from a workplace savings plan with a prior employer that you transferred to Fidelity. Fidelity does not charge a fee to convert eligible contributions to an in-plan Roth account.
Benefits of a Roth in-plan conversion:
- Flexibility: A Roth conversion within your retirement plan provides additional savings flexibility.
- Diversification: It allows you to diversify your retirement assets.
- Tax-free distributions: If you are at least age 59½ or older or have a disability, and it has been five years since your first Roth contribution, a distribution from a Roth plan is tax-free and penalty-free.
- Tax savings: A Roth conversion can potentially reduce future income taxes, allowing you to keep more of your earnings from investments in your workplace savings plan.
| Do I have to pay taxes on pre-tax contributions that I convert to a Roth account? | Yes. You must pay taxes on both the base contribution and any associated earnings if you convert pre-tax contributions to a Roth account. |
| When am I responsible for paying applicable taxes incurred because of a Roth in-plan conversion? | You are responsible for paying all applicable taxes resulting from a Roth in-plan conversion during the income tax year in which the conversion occurred. These taxes are not withheld from your payroll or converted contributions, so it’s essential to account for the tax liability. |
| Will I receive a tax form if I move money to a Roth account?
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Yes. You will receive an IRS Form 1099-R at the end of the calendar year, which will include consolidated tax information on all your applicable conversions for the year. |
What should I consider before making my decision to convert?
- Do you expect to pay higher taxes in the future? If you expect to be in a higher tax bracket after retirement or plan to leave a substantial portion of your retirement assets to beneficiaries, consider a Roth in-plan conversion. By doing so, you may pay lower taxes now compared to waiting until retirement to withdraw taxable funds.
- Do you have a long investment timeframe? The advantages of a Roth in-plan conversion grow the longer your money remains in the Roth account. However, if your investment horizon is less than five years, a Roth in-plan conversion might not be ideal, as early withdrawals could incur a 10% penalty.
- Do I have the ability to pay the tax on the applicable Roth in-plan conversion? You will be responsible for taxes owed on the conversion, and you will need to provide for the payment of taxes outside the plan.
- Will the converted assets in the Roth account be eligible for withdrawal? If you convert money that was already immediately available for withdrawal, it remains accessible. However, if you convert money that wasn’t previously available for withdrawal, those assets stay unavailable for withdrawal, just as before the conversion. Keep in mind that specific criteria must be met for tax-free Roth withdrawals.
Remember, converting non-Roth funds to a Roth account is entirely optional. Before proceeding, carefully consider this decision and consult with your tax advisor.
To register or view the dates for upcoming workshops, click here.
To learn more about Roth and what your workplace savings plan allows, please call your plan’s toll-free number at 800.343.0860 to speak with a Fidelity representative.
For questions, please email HR-Retirement@CooperHealth.edu.