Requirements for Converting a Traditional 401k to a Roth 401k

• July 11, 2011
• Careers, Christian Finance, Stewardship

Roth 401k accounts have been gaining in popularity recently. They only came into existence in 2006 when Congress passed the Pension Protection Act. Just 5 short years later, Hewitt Associates reports that nearly 30 percent of mid-to-large size companies offer a Roth 401k option.

Many businesses have even starting allowing their employee’s to convert their traditional 401k plans to a Roth 401k option. If you are considering making the switch, there are three requirements that must be met before for converting a traditional 401k account to a Roth 401k.

1. Open Enrollment – A company must first offer a Roth 401k plan for employee’s to participate in.

2. Conversion Allowance – The plan must allow Roth 401(k) conversions.

3. Distribution Eligibility – The participant must be at least 59 ½ or older in order to be eligible for a penalty free distribution.

Some 401k plans will also allow you to convert money that is fully vested or to convert employer matching contributions even if you have not reached the age requirement above. Make sure and check your specific 401k plan rules for your eligibility requirements.

• What Is A Roth IRA?
• Contributing To a 401k Plan