Originally Posted by
TED74
I could be misunderstanding what you’re doing, but I don’t believe this is necessary any longer.
Roth In-Plan Conversions for
Company Contributions
Pilots should note the following recent amendment that was made to the Delta 401(k) Plan for pilots.
Effective January 1, 2022, pilots may elect to convert all or any portion of their Non-elective Company Contributions to the Roth In-PlanConversion (Employer) Account. The amounts held in the Roth In-Plan Conversion Account and the Roth In-Plan Conversion (Employer) Account will be treated as Roth contributions for purposes of the investment, distribution and withdrawal provisions of the Plan.
This change now permits Roth conversions of the Company 16% non-elective contributions (Company DC). Once converted to the Roth In-Plan Conversion (Employer) Account, these contributions will remain subject to the current plan restriction that Company Contributions cannot be withdrawn from the Plan while employed.
This new option will require a phone call to Fidelity (800-343-3548) to activate. You may only elect to convert current Company contribution balances. Since you are not able to make a forward-looking election for future contributions, action on the pilot’s behalf is not time critical. You can call multiple times to convert your balances.
What Does this Mean for Our Pilots?
Pilots can now elect to convert their pre-tax Company 401(k) contributions into after-tax Roth 401(k) dollars. For those pilots who want to lock in current tax rates on some or all their Company contributions, they can do so. Previously, pilots were limited on the amount they could convert to Roth through the 401(k) plan and now they can convert up to the 401(k) maximum allowed balances of $61,000 (for year 2022).
Please remember Roth conversions are a taxable event, accordingly, we encourage you to consult with a certified financial planner on your individual situation. As with all plan provisions, this amendment could be impacted by any changes implemented by Congress.
Your Retirement & Insurance Committee considers this a beneficial change as it allows for more options and flexibility for the Delta Pilots. If you have any questions or concerns, please submit a DART to the R&I Committee.
FAQs
Q. Am I able to convert pre-tax Company contribution funds already in my 401(K)account?
A. Yes.
Q. Can I set up a one-time, automatic Roth conversation for future Company contributions?
A. No, pilots must call Fidelity if they would like to convert any pre-tax Company contribution and that contribution must have already been made and deposited into your 401(K) account. Additionally, pilots must manually call Fidelityeach time they chose to make a conversion.
Q. How is the conversion to Roth taxed?
A. Roth-in-Plan-Conversions will be considered a taxable event as current-year income; these events will not be taxed under capital gains.
A Roth conversion now at your current income level would not be advisable. You’re making too much money for it to be beneficial. You’ll probably be better off keeping it in a tax sheltered account and pulling it out later when your income isn’t as high. Although it’s considered flexible, your tax implications now are probably higher than you realize. If you plan on doing this be advised it’ll greatly affect your tax bill if you convert more than a few thousand dollars.
The MBCBP helps everyone. Not just someone who’s about to retire. It shelters more income than we are allowed now from taxes. Many of you who don’t hit the IRS limits for tax sheltered 401k accounts now will soon be able to do that. Especially with a new contract and as you senior up into higher income levels you’ll need more shelters for your income. That’s all the MBCBP provides…. Additional shelter from taxes. So for those naysayers out there just riddle me how that’s bad and not beneficial for everyone. Especially for those who have longer for retirement?