Roth Retirement Options - Human Resources at Ohio State

Roth Retirement Options

Attend an “Ask Fidelity” webinar about Roth (after-tax) retirement contributions at noon on November 17.

In Ohio State’s continuing efforts to help faculty and staff prepare for their future, the university offers Roth retirement options for 403(b) and 457(b) plans.

Traditional 403(b) and 457(b) plans offer pretax contributions to reduce your taxable income when you earn it. Active employees can also make Roth (after-tax) contributions to these plans through a current 403(b) or 457(b) retirement plan provider.

Current 403(b) retirement plan providers are AIG, Fidelity, TIAA and Voya. Current 457(b) retirement plan providers are Fidelity, Ohio Deferred Compensation (ODC) and TIAA.

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How Roth Contributions Work

Roth contributions offer an alternate tax advantage than pretax contributions – they don’t reduce your current year’s taxable income like pretax contributions do. Roth contributions are made on an after-tax basis. You may also consider having both kinds of contributions – pretax and Roth.

Pretax Contributions
Roth Contributions
You pay taxes when you take a distribution.
You pay taxes when you make your contributions to take advantage of future potential tax benefits.

With a Roth balance, you can withdraw your account balance tax-free if you meet the requirements for a qualified distribution. To meet these requirements when you take your distribution, you must be at least 59 1/2 years old with a Roth account open for at least five years. For example, if you start making Roth contributions in July 2022, your account will qualify for tax-free distributions after July 2027. In addition to the age and account eligibility requirements noted above, death or disability can also meet the eligibility for qualified distributions. Participants in the university-sponsored retirement plans may keep their account(s) open after terminating employment with Ohio State, allowing them to meet the five-year requirement.

Note: If your distribution is not considered qualified, you will be taxed on your investment earnings, plus you will owe an additional 10% IRS penalty.

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Understanding the Differences between Traditional Pretax and Roth Contributions

The following chart is designed to help you understand some key differences between pretax contributions and Roth contributions.

Traditional Pretax Contributions vs. Roth Contributions
Feature Pretax Contributions Roth Contributions
Your Contributions Your contribution goes into your account before taxes, and your current taxable income is reduced Your contribution goes into your account after taxes, and your current taxable income is not reduced
IRS Contribution Limit for 2022 $20,500

If you’re age 50 or older, you are eligible for catch-up contributions of an additional $6,500

Note: You can make pretax contributions, Roth contributions, or a combination of both, but your total contributions may not exceed the annual limit

Employer Contributions Not available
When You Take a Distribution You will pay income taxes on your contributions and investment earnings when you take a distribution.1 You will not pay taxes on your contributions when you take a distribution because your contributions were made on an after-tax basis.

You will not pay taxes on investment earnings if you make a qualified distribution.

1 An additional 10% IRS tax penalty may apply on any distributions taken before age 59 ½.

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How to Make Roth Contributions

Starting July 1, 2022, active faculty and staff can make Roth contributions to their 403(b) account through AIG, Fidelity, TIAA and Voya; and/or to their 457(b) account through Fidelity, ODC and TIAA.

Your contribution election will become effective as soon as administratively possible. Deductions for 457(b) plans begin the month after your completed election is processed.

Note: Changing your contribution election will not impact how your contributions are invested.

To make Roth contributions to 403(b) accounts through AIG, Fidelity, TIAA and Voya, follow these election steps:

  1. Log into NetBenefits
  2. Choose “Contribution Amount” in the Quick Links menu for your 403(b) plan
  3. Choose “Retirement Providers” to select your retirement provider
  4. Choose “Contribution Amount” to enter an amount for your Roth 403(b) and/or Pretax 403(b)

To make Roth contributions to 457(b) accounts through Fidelity and TIAA, follow these election steps:

  1. Log into NetBenefits
  2. Choose “Contribution Amount” in the Quick Links menu for your 457(b) plan
  3. Choose “Retirement Providers” to select your retirement provider
  4. Choose “Contribution Amount” to enter an amount for your Roth 457(b) and/or Pretax 457(b)

To make Roth contributions to 457(b) accounts through ODC, go to ohio457.org and follow the instructions on the website.

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In-plan Roth Conversions

In addition to the Roth contribution option, 403(b) and 457(b) participants can choose to complete an in-plan Roth conversion. The in-plan Roth conversion feature is not available at Ohio Deferred Compensation (ODC).

An in-plan Roth conversion involves transferring all or a portion of your university-sponsored pretax 403(b) and/or 457(b) retirement plan balances and moving them into a Roth account within the same plan. The assets you convert will remain invested according to your investment elections on file with the 403(b) or 457(b) plan provider completing the conversion.

Note: You will be responsible for paying any taxes in the year in which you convert pretax assets to Roth. Depending on your situation, this could be a significant amount. Therefore, you should consider consulting with a tax advisor or qualified financial professional before making an in-plan Roth conversion.

If you have an account balance with a legacy provider, you can still take advantage of an in-plan Roth conversion, but you must first transfer your account balance to a current provider. Your retirement plan account is considered a “legacy account” if contributions were made prior to January 4, 2021. If you have questions about whether your account is eligible to make an in-plan Roth conversion, please contact a current provider directly.

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Frequently Asked Questions

Who is eligible to elect Roth contributions within the 403(b) and/or 457(b) plans?
Most Ohio State employees are eligible to participate in the 403(b) and 457(b) plans. Check your benefits eligibility.

How do I enroll in the 403(b) and/or 457(b) plan? When can I elect Roth contributions?
Contribution and provider elections for the 403(b) and/or 457(b) plans are made through Fidelity’s Netbenefits website. Current 403(b) plan providers are AIG, Fidelity, TIAA and Voya. Current 457(b) providers are Fidelity, ODC and TIAA. Starting July 1, 2022, you may elect Roth contributions to these plans. For detailed steps on how to enroll, review the NetBenefits User Guide. For Ohio Deferred Compensation elections, visit ohio457.org.

What are Roth contributions?
Roth contributions are an option within the 403(b) and/or 457(b) supplemental retirement plans that allows employees to contribute after-tax dollars to their plan account.

How do Roth contributions work?
Roth contributions are deducted from your paycheck like pretax 403(b) and/or 457(b) contributions with the exception that they are deducted with after-tax dollars.

What is the difference between pretax contributions and Roth contributions?
Pretax contributions allow you to benefit from tax advantages now, and Roth after-tax contributions allow you to benefit at retirement. Your pretax 403(b) and/or 457(b) balance is taxed when funds are withdrawn during retirement. Alternately, your Roth contributions, are taxed when deducted from your pay. This allows qualified distributions to be taken later on a tax-free basis.

Can I elect pretax and Roth contributions at the same time?
Yes, you may elect both 403(b) and/or 457(b) pretax and Roth (after-tax) contributions. However, you may only contribute to one provider per plan. Your contribution total for each plan is determined by totaling both your pretax and Roth contributions within the same calendar year. Your pretax and Roth (after-tax) 403(b) contributions share the same IRS limit. In 2022, the IRS contribution limit for the 403(b) plan is $20,500 if you are under the age of 50. If you will be 50 or older in 2022, you may contribute an additional $6,500. The same limits apply to the 457(b) plan.

What are the requirements for a qualified distribution from a Roth balance?
You must be at least 59 ½ years old and your Roth account must be open for at least five years from your first contribution to meet the requirements for a qualified distribution. For example, if your first contribution to your Roth account was July 2022 and you met all qualified distribution criteria such as age, your Roth balance will qualify for tax-free distributions after July 2027. Death or disability also meet the requirements for a qualified distribution.

What happens if I take a non-qualified distribution?
Distributions that do not meet the qualified distribution requirements will result in your Roth investment earnings being taxed. An additional 10% IRS penalty will also be assessed.

Does the in-plan Roth conversion feature have qualified distribution rules?
Yes, the same rules apply to the in-plan Roth conversion that apply to Roth contributions. You must meet the Roth qualified distribution requirements to receive tax-free benefits. Your Roth account needs to be in existence for at least five years and you need to be at least 59 ½ years old when you take a distribution.

What is the in-plan Roth conversion feature?
The in-plan Roth conversion feature allows you to convert all or a portion of your 403(b) and/or 457(b) pretax account balance into a Roth balance so you can take advantage of future tax benefits.

The in-plan Roth conversion feature is not available at Ohio Deferred Compensation (ODC).

Are there any tax implications for in-plan Roth conversions?
Yes, you are responsible for paying any taxes in the year in which you convert your pretax assets to Roth. Consider consulting with a tax advisor or qualified financial professional before making an in-plan Roth conversion.

How do I make an in-plan Roth conversion?
You may make an in-plan conversion through a current 403(b) and/or 457(b) plan provider starting July 1, 2022. To learn more about how to make a conversion, please contact your provider or review the list of current 403(b) and 457(b) providers.

Please note that the in-plan Roth conversion feature is not available at Ohio Deferred Compensation (ODC).

I have an account balance with an Ohio State legacy provider, can I make an in-plan Roth conversion?
If you have an account balance with a legacy provider, you can still take advantage of an in-plan Roth conversion. However, you must first transfer your account balance to a current provider. Current 403(b) plan providers are AIG, Fidelity, TIAA and Voya. Current 457(b) providers offering in-plan Roth conversions are Fidelity and TIAA. Please contact the current provider to discuss the transfer of your legacy account and the in-plan Roth conversion.

Please note that the in-plan Roth conversion feature is not available at Ohio Deferred Compensation (ODC).

How do I know if I have a legacy account?
Your 403(b) and/or 457(b) account is considered a legacy account if contributions were made prior to January 1, 2021. If you have questions about whether your account is eligible to make an in-plan Roth conversion, please contact a current provider directly.