Roth Contribution Option
When you make traditional contributions to IU’s supplemental retirement plans, you contribute with pre-tax dollars, then pay taxes on withdrawals. The Roth option allows you to contribute with after-tax dollars, then take qualified withdrawals tax-free.
With IU’s supplemental retirement plans, you have the choice of making pre-tax contributions, Roth (after-tax), contributions, or any combination of the two. The annual IRS contribution limit for each plan includes your pre-tax and Roth contributions combined.
How to Make Roth Contributions
You can change the type and amount of your supplemental retirement plan contributions at any time by following one of the two options below.
- Search for and select the Employee Center task in One.IU
- Complete two-step login using your IU username/passphrase and Duo
- Click on the Benefit Details tile
- Click the Optional Benefit Changes tile
- Click the green Start Optional Benefit Change button
- Read the information on the Welcome screen. To progress through the OBC process, click the yellow Next button in the upper right-hand corner of the screen.
- Verify your personal information, payroll direct deposit and tax withholding details, and emergency contact, and make updates if needed. Click Next to proceed to the next step.
- Click the Start My Enrollment button. On the next screen, click the gray Select button next to the event.
- Under the ‘Benefit Plans’ heading, find and select the plan you wish to change – Roth TDA or Roth 457(b).
- Under ‘Contributions’ enter a flat-dollar amount or percentage of your pay that you would like to contribute each pay period.
- Click Done in the upper right-hand corner to continue.
- If you wish to change your contributions to other plans, repeat steps 9 – 11.
- Once you have made all of your elections, review your elections by selecting the Enrollment Preview Statement button under the ‘Enrollment Summary’ heading. Click the X in the upper right-hand corner of the screen to exit the preview.
- When you are finished, click the green Submit Enrollment button under the ‘Enrollment Summary’ heading.
- A confirmation message will appear on the screen once your elections have been submitted successfully. Additionally, an e-mail confirming your submission will be sent to your IU email address within one business day. If you do not receive an email, your changes were not submitted properly.
- To review your submission at any time, log in to the Employee Center, select the Benefit Details tile, then the Benefits Statement tile.
Paper Form Instructions
Remember, the after-tax Roth option does not increase the annual contribution limits for the plans. It just means that you may designate some or all of your contributions to these plans as after-tax Roth. It is your responsibility to ensure you do not exceed these limits between your pre-tax and after-tax contributions.
Frequently Asked Questions
Do I need to create a new Fidelity NetBenefits account for my Roth contributions?
No. If you already make tax-deferred contributions to an IU supplemental retirement plan, you are not issued a new account with Fidelity if you decide to make after-tax Roth contributions. Any Roth contributions you make go into your existing account and are tracked separately from your tax-deferred amounts.
How do Roth contributions affect my take home pay?
An after-tax Roth contribution will reduce your take-home pay more than if you made an equivalent tax-deferred contribution because the Roth contribution is subject to income taxes when deducted from your paycheck.
What is a Roth-qualified withdrawal?
Roth qualified withdrawals or distributions are tax-free when made after a 5 year holding period and after you attain age 59½, after your death, or attributable to your being disabled. The five-year holding period begins on January 1 of the year you make your first Roth contribution.
Can I convert Roth contributions to pre-tax contributions if I change my mind?
No. 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.
Are after-tax Roth contributions right for me?
Below are some general statements that may help you decide if Roth contributions are right for you. Because everyone’s tax situation is unique, it is recommended that you speak to an investment advisor or a Fidelity Workplace Financial Consultant before making any significant changes to your retirement savings.
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 tax-deferred 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 or disabled or deceased when a distribution is taken, then the earnings will not be tax-free).
Download Fidelity’s Roth Option Flyer for additional information and considerations.