Is this a new feature?

Yes. In-plan Roth conversion is a new feature you can add to your plan. Existing plans are not enrolled automatically; adding it requires a plan amendment (see “Steps to Take” below).

What is an in-plan Roth conversion?

A 401(k) holds money in different “buckets” depending on how each dollar was taxed:

• Pre-tax money was contributed to your plan before taxes. Tax is owed later, when it’s withdrawn.
• Roth money was already taxed going in. Qualified withdrawals later can come out tax-free, including the growth.

An in-plan Roth conversion lets a participant move money from a non-Roth bucket (like their pre-tax balance) into the Roth bucket without the money ever leaving the plan. That’s what “in-plan” means: the money stays invested where it is; only its tax treatment changes.

The investments themselves don’t change. It’s a source-to-source transfer, so nothing is sold or rebought. For example, $5,000 sitting in a stable value fund on the match source simply moves over as $5,000 in that same stable value fund on the Roth source.

Why does it matter?

This is an advanced tax-planning feature your employees may value, especially higher earners, employees who may be nearing retirement, and those working with a financial or tax advisor. By converting eligible money to Roth, a participant chooses to handle the taxes now (and may, for some sources, owe little to nothing) in exchange for the potential for tax-free growth and qualified withdrawals later.

It also lays the groundwork for our future Mega Backdoor Roth capability (more on that below), which is a sought-after feature among high earners. Offering it can make your plan more competitive and more attractive to employees who want sophisticated savings options and tax planning strategies.

Who does this affect?

Plan eligibility

• Available for 401(k), Solo 401(k), and 403(b) plans.
• Available on the Plus and RKO offerings.
• Not available for Starter 401(k) plans or the Workplace solution. If you have a Starter 401(k) and want this feature, we can work with you to move it to a 401(k). If you have the Workplace solution, we can work with you to move to Plus.

Savers

• Available to both active and terminated participants.
• Conversions are only allowed from funding sources that are 100% vested; partially vested sources are not eligible, even for the vested portion. (If your plan has no employer match, employee contributions are always 100% vested and eligible.)

Steps to Take

1. Amend your plan. Existing plans must adopt a plan amendment to add this feature. Amendment fees apply. See the linked Help Center article for assistance: “How Do I Request a Plan Amendment?” Your plan documents will be set up to allow both types of conversion:
   • In-plan Roth transfers: conversions that do not require the saver to be eligible for a distribution.
   • In-plan Roth rollovers: conversions of amounts that are otherwise eligible for distribution.
2. Make sure required features are in place. A few plan settings must be aligned before this feature can work; our team or your plan’s TPA can help you review these requirements as part of the amendment process.
   • Roth contributions must be enabled on the plan.
   • If your plan allows hardship withdrawals, they must be available from all sources.
   • If your plan allows in-service distributions (for example, at age 59½), they must be permitted from all sources.
   • Plans that currently limit these withdrawals by source will need to be amended to allow them from all sources.
   • New plans must choose either to allow in-service distributions from all sources, or not at all.
3. Communicate to your employees. Once the feature is live, let employees know it's available. Adding this feature through a plan amendment will automatically trigger a Summary of Material Modifications (SMM), which notifies participants of the change to their plan. If you'd like to send additional communication beyond the SMM, contact us and we can help you create a participant notice. A participant-facing help article is also available for you to share -- see the "Guide for Savers" linked below.

Which money can be converted?

At launch, employees can convert from these sources:

• Employee pre-tax deferrals
• Employer contributions (match, non-elective, profit sharing, safe harbor) when fully vested
• Pre-tax rollover amounts

Conversions can only be made from accounts that are 100% vested. The converted amount is taken proportionally (pro-rata) across existing investments in the source selected. Investments themselves do not change.

⚠️ Prevailing wage contributions are not eligible for conversion.

Coming later in 2026: After-tax (voluntary after-tax) contributions as a convertible source.

Mega Backdoor Roth (coming later in 2026)

A “Mega Backdoor Roth” is a strategy that combines two features: after-tax contributions and in-plan Roth conversion. A participant contributes extra after-tax dollars, then converts them to Roth.

This is a sought-after feature among higher earners, as it allows employees to contribute after-tax dollars beyond the standard 401(k) limits and then convert those contributions to Roth, combining the benefit of higher contribution limits with the potential for tax-free growth in retirement.

This feature is coming soon. After-tax contributions are expected to be added later this year. A plan must have both after-tax contributions and in-plan Roth conversion enabled for a participant to use the Mega Backdoor Roth strategy. 

We will notify you in advance when that capability is ready.

One thing to note for when it does arrive: the initial solution will not automate the conversion of after-tax contributions to Roth on a per-payroll basis. Participants will initiate conversions manually through the portal. Payroll automation is planned as a future enhancement.

Frequently Asked Questions

Is there a cost to the conversion itself? 

• No. There is no fee charged on the conversion transaction. We do charge a  $350 plan amendment fee to add the feature.

How many conversions can an employee make? 

• Unlimited conversions are allowed per year.

Will the conversion change how money is invested? 

• No. It’s a source-to-source transfer, so investments stay exactly the same, meaning nothing is bought or sold. Only the tax bucket changes.

Do employees owe taxes when they convert? 

• Converting pre-tax money to a Roth account is generally a taxable event for the participant. A form called the 1099-R is generated for pre-tax money converted. Tax outcomes depend on each individual’s situation, so employees should be encouraged to consult a tax advisor. We do not provide tax advice.

How do employees request a conversion? 

• Through their digital portal. They choose the dollar amount and the source(s) to convert from.

Does this require employees to be eligible for a distribution? 

• Not necessarily. Plan documents will be set to allow both transfers (no distribution eligibility required) and rollovers (for amounts otherwise eligible for distribution).

We have a Starter(k). Can we offer this? 

• Not directly, but we can work with you to move the Starter(k) to a 401(k), which supports the feature.

Is there a 5-year rule employees should know about? 

• Yes. Converted amounts may have their own waiting period before withdrawals are fully tax-free. If a participant withdraws converted money before it has been in the plan long enough, part of it could be subject to state and federal taxes or a penalty. Employees should be encouraged to consult a tax advisor for guidance specific to their situation.