The Wisconsin Budget Bill enacted on June 26, 2011 retroactively adopts federal rules that allow for optional conversions of 401(k) and 403(b) plan money to in-plan Roth accounts.
The new federal rules were introduced September 27, 2010 by the Small Business Jobs Act. Our December 2010 article, "New In-Plan Roth Conversion Rules Get a a Mixed Review," discusses the advantages and disadvantages of in-plan Roth conversions.
On November 12, 2010, the Wisconsin Department of Revenue issued a statement indicating that it did not follow the federal rules permitting in-plan Roth conversions. The statement warned that various penalties could result for Wisconsin purposes if individuals made these conversions.
If you made an in-plan Roth conversion in 2010 and received Wisconsin penalties, you can now obtain refunds for the amount of these penalties by filing an amended Wisconsin tax return.
Call us if you have any questions.
James Derzon, CPA, is the employee benefits specialist for our firm on technical matters pertaining to retirement plans and employee benefits. Jim works in these areas with our clients, large and small. He has extensive experience in both industry and public accounting.