The Roth feature means that you can now make contributions to the Plan, via the payroll system, with salary that has already been taxed. Moreover, if you hold your account with “after-tax” Roth assets for at least five years, the investment gains and interest can be paid to you without tax—essentially, a source of tax-free money in the future.
All aspects of the Plan apply to the new Roth, after-tax assets, as they do to the pre-tax assets. This means all plan provisions, investments, transfers, distributions—everything—that applied to pre-tax contributions in the Plan now apply, equally, to after-tax assets in the Plan.
You should learn about the differences between pre-tax and after-tax savings, and apply what you learn to your own financial and career circumstances.
Click on the link below to access FAQs about Roth, and some comparative information about pre-tax and post-tax savings. While the source of much of this information is the IRS’ web site, it cannot be considered either tax or legal advice.
You might find it helpful to be familiar with the following terms before opening the FAQ link below.
The three Contract Providers—Fidelity, TIAA and VALIC—offer the same products, investment funds and service for Roth assets in the Plan as they do for pre-tax assets.
The Plan allows participants to make both pre-tax and after-tax contributions. However, the combined amount of both types of contribution cannot exceed the IRS’ annual limits on contributions which can change each year (2018 limits are on the link below).
The Plan allows you to convert your current pre-tax savings to after-tax savings via an “in-plan Roth rollover”. However, you must be eligible to draw funds from the Plan in order to take advantage of this feature. That is, you have either attained age 59 ½ or terminated employment with the Commonwealth.
Especially important is the fact that when rolling pre-tax assets over to become after-tax Roth asset, you must pay income tax on the amount rolled over.