Recent IRS guidance clarifies a number of outstanding questions regarding “in-plan conversions” of non-Roth balances to Roth balances in 401(k), 403(b) and governmental 457(b) plans. In particular, the guidance confirms that converted balances are subject to the same distribution restrictions after the conversion as they were prior to it.
by Maureen O’Brien and Ruth Wimer
On January 11, 2013, the Internal Revenue Service published Notice 2013-8 providing a special administrative procedure for employers with respect to 2012 transit pass benefits. The American Taxpayer Relief Act retroactively increased the monthly transit benefit exclusion under Section 132(f)(2)(A) of the Internal Revenue Code for commuter highway vehicles or transit passes from $125 per participating employee to $240 per participating employee for the 2012 calendar year (the monthly transit benefit exclusion for parking remains at $240). The notice addresses employers’ questions regarding the retroactive application of the increased exclusion, which can result in both decreased FICA and federal income tax liability. Employers acting promptly, in many cases by January 31, may have less administrative burden in obtaining a benefit for themselves and their employees with respect to the retroactive increase for employer-provided transit benefits.
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