Citi Benefits Handbook
Roth In-Plan Conversions
Actively employed participants are able to convert existing non-Roth Plan balances to after-tax Roth amounts. If you are actively employed and choose this option, you will have taxable income in the year of conversion; however, you may receive tax-free earnings when you receive distributions in the future. Your Roth conversion amounts will be held in a Roth In-Plan Conversion Account as a sub-account of your Roth Contribution Account.
Your decision to convert may depend on many factors, including:
- Whether you have Plan money eligible for an in-Plan Roth conversion. Generally, only account balances that are fully vested and currently able to be distributed from the Plan and that would be an eligible rollover distribution if distributed from the Plan are eligible for an in-Plan Roth conversion. This generally means if you are at least age 59-1/2, you may apply some or all of the vested portion of your account to an in-Plan Roth conversion. However, hardship distributions, minimum required distributions and dividend distributions on Citigroup Common Stock are not eligible for in-Plan Roth conversion.
- Your expectations about current tax rates versus tax rates at the time you take your distribution — if you believe that tax rates will be higher in the future when you receive your distribution, you may decide to convert amounts to a Roth Contribution Account.
- Your ability to pay taxes now with funds outside the Plan — you will need money to pay taxes at ordinary income tax rates on any Before-Tax Contribution balances you convert to a Roth Account in the calendar year you make the conversion. The money to pay these taxes generally will have to come from outside the Plan.
- Whether you expect to meet the Roth After-Tax Contribution requirements for a tax-free distribution of the earnings on your account (a "qualified distribution"):
- To meet this requirement, your Roth Contribution Account must be in existence for at least five years (which may include prior years if you have made earlier Roth After-Tax Contributions); and
- You must be at least age 59-1/2 when you take the distribution (other than a distribution due to your death or disability).
Generally, the five-year period starts on January 1 of the year you make your first Roth After-Tax Contribution in the Plan or Roth In-Plan Conversion. If you take a distribution of your converted amounts before your Roth Contribution Account has been in existence for five years the earnings on the amounts you contributed or converted are subject to taxation. In addition, if you take a distribution before age 59-1/2 you may be subject to a 10% early withdrawal penalty.
Before making a decision about an in-Plan Roth conversion, please consult a professional tax adviser to ensure this strategy is consistent with your overall personal financial goals.