Twenty-nine percent of companies with defined contribution plans offered a Roth 401(k) option as of the end of 2009, and another 25% were “likely” to add such an option this year, according to a Hewitt Associates report.
“Our impression is that (Roth 401(k) options) will increase markedly over the next few years,” Pam Hess, director of retirement research at Hewitt Associates, said in an interview. She said employers are becoming more comfortable with the Roth option, adding that more may be attracted to it when they see that it’s working for their peers.
The Hewitt report includes a survey of 162 companies, including clients and non-clients. The report also features a detailed analysis of 21 Hewitt clients, serving 504,000 participants, to assess trends in 401(k) options.
Workers ages 20 to 29, at 16.6%, were most likely to choose a Roth option than any other age group, according to the client analysis. The next highest usage, 9.4%, was in the 30-to-39 age range. Based on earnings, those making $60,000 to $70,000 per year had the highest usage of Roth options, 9.9%.
Ms. Hess said the adoption of Roth options had been flat in 2008 and 2009 due to stock market setbacks and volatility. She added that the in-depth analysis of 21 Hewitt clients revealed that the biggest hurdles to adopting a Roth option were lack of interest by participants and the cost and complexities of implementing the options.
“Adding a Roth feature is not as simple as clicking an on/off switch,” the Hewitt report said. “It takes considerable planning, implementation and communication.”