Get the facts about Roth (after-tax) contributions
IU’s supplemental retirement plans—the IU TDA and IU 457(b)—offer flexibility by allowing you to pay taxes on your contributions now or in the future.
With traditional contributions, you fund the account with pre-tax dollars then pay taxes on withdrawals in the future. The Roth option allows you to contribute with after-tax dollars, then take qualified withdrawals—those taken after age 59½ and no earlier than five years after contributions were first made—tax-free.
Roth contributions are not the same thing as a Roth IRA, and don’t increase the amount you can contribute, but can provide additional flexibility in your retirement savings strategy.
Keep in mind that the annual IRS limits (the maximum amount you can contribute to each plan during the year) include pre-tax and Roth contributions combined, so each dollar you contribute as Roth reduces the amount that can be contributed pre-tax (and vice versa).
SECURE 2.0
Roth catch-up contribution rule begins in 2026
Starting in 2026, employees age 50+ earning over $150,000 must make catch-up contributions as Roth (after-tax).
Everyone’s tax situation is unique, so you should speak with an investment advisor or a Fidelity Workplace Financial Consultant before making any significant changes to your savings strategy. But here is some information that may help you decide whether Roth contributions are right for you.
You might benefit from Roth contributions if you:
Want qualified tax-free distributions in retirement
Cannot have a Roth IRA due to IRS income restrictions, but want a pool of tax-free money to draw from in retirement
Want to pass on assets tax-free to heirs
Have a long retirement horizon that will allow time to accumulate tax-free earnings
You might benefit from traditional pre-tax contributions if you:
Want to lower your current taxes
Are close to retirement, expect to start taking distributions, and don’t have several years to wait for compounding of Roth contribution earnings to make up for the tax liability paid when Roth contributions are deducted from your paycheck
Don’t think you will meet the criteria for Roth distributions to be tax-free (for example, if the account won’t be open for at least 5 years and you won’t be at least age 59½ when a distribution is taken, then the earnings will not be tax-free)
Learn more about Roth Contributions
To begin making Roth contributions, you can submit an optional benefit change request through the Employee Center, or complete a paper Salary Deferral Agreement. Contribution changes can be made at any time during the year.
Just like with traditional pre-tax contributions, you elect either a flat dollar amount or a percentage of your pay each pay period to contribute as Roth. These contributions are then deposited into your existing IU TDA or IU 457(b) account with Fidelity each pay period.
Keep in mind that the annual IRS limits include your pre-tax and Roth contributions combined. Although the funds are deposited into the same account, Fidelity tracks pre-tax and after-tax contributions separately to help you monitor your totals and stay within the limits.
Roth contributions generally reduce your take-home pay more than an equivalent pre-tax contribution. This is because Roth contributions are made after income taxes are withheld from your paycheck.
While Roth contributions do not lower your taxable income today, they may provide tax advantages later since qualified withdrawals in retirement are tax-free.
Roth contributions are not the same as a Roth IRA. “Roth contribution” is a general term for an after-tax contribution to a retirement account, whereas a Roth IRA is a specific type of retirement account you open yourself.
In comparison, the IU supplemental retirement plans allow you to potentially contribute significantly more each year than you could to an IRA. Not only can you can enroll in both plans (the IU TDA and the IU 457(b) plan), but you can contribute up to the IRS limit into each plan, each year.
You don’t need to create a new Fidelity NetBenefits account for your after-tax Roth contributions if you already make tax-deferred contributions to an IU supplemental retirement plan, you are not issued a new account with Fidelity.
Any Roth contributions you make go into your existing account and are tracked separately from your tax-deferred amounts.
You cannot convert Roth contributions to pre-tax contributions.
Once you elect to make a Roth contribution, it is irrevocable. You can change future contributions to tax-deferred, but once the election has been made to designate a contribution as after-tax Roth you cannot change it to tax-deferred retroactively.
An in-plan conversion of pre-tax contributions to Roth is allowed.
You should set up an appointment with a Fidelity Workplace Financial Consultant to learn about your options and to request the conversion. You can schedule an appointment using the online scheduling tool or by calling +1-800-642-7131.
To make a qualified, tax-free and penalty-free withdrawal of Roth contributions and earnings, both of the following conditions generally must be met:
The account must be established for at least five years (this is known as the five-year “holding period”); and
The withdrawal must be taken at or after age 59½, or as a result of disability or death.
The five-year rule means at least five years must pass between the beginning of the tax year of your first Roth contribution and the withdrawal of earnings from that account.
If earnings are withdrawn before the five-year holding period is met, the withdrawal is considered non-qualified and may be subject to taxes and, in some cases, IRS penalties.
Once the five-year rule has been satisfied and the account owner is age 59½ or older (or meets another qualifying condition such as disability or death), withdrawals of Roth earnings are considered qualified and are exempt from both taxes and penalties.
