Roth Communication April 2021
Effective July 1, 2021, the Bryn Mawr College Retirement Plan will be modified to add a Roth option.
Currently, contributions employees make to the retirement plan are “pre-tax” or “tax-deferred” meaning that there is no federal income tax withheld from the amount of the contribution, but that money – and investment earning that accumulate over the years – are taxable when they are withdrawn from the Plan. A Roth format works in the opposite; employees electing the Roth format will pay federal income taxes now on the amounts that they contribute to the Plan, but there is no tax due when the money is withdrawn (assuming that the money has been invested in the Plan for a minimum of 5 years and the retiree is 59 ½ or older when making the withdrawal).
Only new contributions you make from your pay are eligible for Roth; any contributions that the College makes on your behalf must remain in the existing format and will be taxable upon withdrawal. You also cannot re-categorize any of your existing balances as Roth; they must remain in the tax-deferred format.
The first date that you can make the Roth election through the Transamerica site is July 1, 2021. The first pay that will be able to reflect a Roth election is July 16 for bi-weekly employees and July 30 for monthly employees.
Additional information describing the Roth option, including materials provided by Transamerica and TIAA, is on the Human Resources website. In addition to written materials, there is also a link to a pre-recorded video provided by Transamerica, entitled “Is Roth Right for You?” which also includes instructions on how to elect the Roth option through the Transamerica site.
Please note that if you are not interested in the Roth option, you do not have to do anything; your contributions will continue to be on a pre-tax basis. Only employees who actively elect to direct some or all of their contributions to the Roth feature (through the Transamerica site) will be enrolled in the Roth option.
Anyone considering a switch to Roth should review the impact that this change will have on their taxes and take-home pay. As an example of the impact, an employee who currently elects a Retirement Plan contribution of $500 per month from their pay and falls in the 24% marginal tax bracket should expect that a switch to Roth will reduce monthly take-home pay by $120. There is a link on the Human Resources site to current marginal tax rates if you want to calculate the specific impact to your paycheck.
Please note that at the current time, TIAA cannot administer loans on Roth balances. Roth loans currently are only available from funds on the Transamerica platform.
Please feel free to contact me at ext. 5266 or email@example.com if you have any questions.