Roth 457 Provision Excluded From Latest Version of Tax Extenders Legislation

June 18, 2010

Provisions to allow 457(b) deferred compensation plans to carry a Roth feature have not been included in the Senate’s version of the tax extenders legislation known as the American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213).

The Roth provision would have leveled the playing field for state and local government workers by permitting 457(b) plans to offer the designated Roth accounts already permitted in 401(k) and 403(b) plans.

The Senate, in the latest version of the bill that it is considering, also removed language from the bill that would have:

• permitted distributable amounts in defined contribution plans to be converted from pre-tax to Roth status inside the plans,
• rules that would have required the inclusion of an index fund in defined contribution plan investment lineups, and
• provisions expanding defined contribution plan fee disclosure that would apply to non-ERISA plans including local and state governmental plans.

Although discussions continue between the House and Senate on the tax extenders legislation, it is unlikely that there will be any further action on these provisions in the tax extenders bill. Action on some items may occur in legislation later this year.