Employer Match & Roth Options Expand in 2025

Roth revolution in DC plans is accelerating a new era of tax diversification

As of 2025, a growing number of employers are offering Roth employer contributions, and some are exploring the idea of non-elective Roth contributions. This development opens up powerful new planning strategies – especially for participants who anticipate being in a higher tax bracket in retirement.

What’s Changing?

Traditionally, employer contributions to 401(k) and 403(b) plans were made to pre-tax accounts. That’s no longer the only option. Thanks to provisions in the SECURE 2.0 Act, plan sponsors now have the option to direct their matching or non-elective contributions into Roth accounts – provided participants are fully vested.

This development is still evolving. While the IRS and Treasury have yet to fully finalize the mechanics and compliance requirements, several providers have already enabled Roth matching, and more are expected to follow.

Planning Opportunities Your Plan

From a financial advisor’s perspective, this is a game-changer in retirement income tax diversification. For years, we’ve encouraged clients to balance their pre-tax and Roth savings to manage future tax exposure. Now, employer contributions can play a direct role in that strategy.

For younger, lower-income earners, Roth contributions – both elective and matching – are especially advantageous, as they’re likely in a lower tax bracket now than they will be at retirement. Mid-career professionals, on the other hand, may benefit from split contributions depending on income, lifestyle goals, and existing savings allocations.

Points of Caution

However, advisors must counsel clients carefully. Roth employer contributions are taxable in the year they’re made, unlike traditional match contributions. That means participants could see higher taxable income than expected if these contributions aren’t properly planned for.

Moreover, the recordkeeping and plan document updates necessary to implement Roth matching require proactive coordination with plan sponsors and third-party administrators.

Bottom Line

The Roth revolution in DC plans is accelerating. Financial advisors must help participants understand the trade-offs, tax consequences, and long-term benefits of these new match options – and ensure no one is caught off guard at tax time.

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