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Plans Offering Roth Contributions Continues to Increase

The percentage of plans offering Roth contributions continued to increase for the 2015 plan year. Vanguard [1] reported an increase from 56% to 60% while Fidelity [2] reported an increase from 49% to 55% for the 2014 and 2015 plan years, respectively. This continues a trend seen over the past several years (Figure 1).

Percentage of Plans Offering Roth ContributionAccording to data provided by Fidelity, larger plans have higher Roth adoption rates than smaller plans: Nearly 70% of plans with more than 5,000 participants and 65% of plans with 2,500 to 5,000 participants offer Roth contributions, above the average of 55% across plans of all sizes.

Participants taking advantage of Roth when it is offered in the plan are diverse from an age perspective, but appear to be more concentrated in the younger age bands. According to a survey of T. Rowe Price’s large market plans (defined as those with assets greater than $150 million), 24% of participants between the ages of 20 and 29 utilize Roth contributions, 30% between ages 30 and 39, 23% between ages 40 and 49, and 18% between ages 50 and 59. [7]

According to industry survey data, overall participation rates are generally between 7%-14%. Roth usage can vary significantly by plan, typically due to how long the feature has been offered. The key benefit for participants electing Roth contributions is tax diversification. While contributions are made after-tax, withdrawals are tax-free. This may be especially beneficial for those in the early stages of their working career with lower incomes, and therefore income tax rates, than they will have later in their career.

For plans that do not already offer a Roth contribution option, PEI encourages plan sponsors to learn more about the details and determine if it is suitable for your plan to adopt. If your plan offers Roth contributions today, we suggest plan sponsors ensure education is available to participants regarding the feature.


1 Vanguard’s How America Saves 2016, Vanguard 2015 Defined Contribution Plan data.
2 Building Futures: Plan and Participant Data Analysis – Fidelity analysis of 22,000 corporate DC plans as of December 31, 2015.
3 PEI Roth 401(k) provider survey.