Plan and Participant Contribution Setup Samples

This document will provide a high-level overview of the requirements needed to send Roth and Pre-tax contributions separately on Morningstar^® Retirement Manager^SM.

Assumptions

Roth contribution type is only available for 401(k), 457, Basic and Supplemental 403(b) plan types.
The Roth contribution type is only available for the participant’s inside accounts. It is not available as a contribution type for partner or outside accounts.
Roth contributions can have their own administrative maximum which is separate from the Pre-tax contribution maximum.
Roth contributions are part of the overall plan combination limit.
The annual compensation limits will include Roth contributions.

Schema

Currently Morningstar maintains different nodes for contribution rules in the participant schema. There are three rules that can be sent for contribution at the participant level: PreTaxContributionRules node, PostTaxContributionRules node, and RothContributionRules node. RothContributionRules should be used for all participants in a plan that allows for Roth contributions, even if a participant is not making a contribution to Roth. The RothContributionRules node will allow for both Pre-Tax and Roth Contribution information to be sent for a participant. If Post-Tax is also available for a plan that offers Roth contributions, the PostTaxContributionRules node should be sent along with the RothContributionRules node.

XML Specifications

Plan XML

EnableRoth — This optional flag is used in the plan batch file to indicate if the plan allows for Roth contributions. The flag is optional and the default for the flag is False.
RothContributionRules — This node should be used when a plan offers Pre-Tax and Roth deferrals.
MaxRothContri (Rate) — An optional flag sent in the plan batch file to indicate the maximum Roth Contribution percentage allowed to the plan. Sent within RothContributionRules node.
MaxRothContri (Amount) — An optional flag sent in the plan batch file to indicate the maximum Roth Contribution amount allowed to the plan. Sent within RothContributionRules node.

Participant XML (Batch and Real-time)

RothContributionRules — This node should be used when a plan offers Pre-Tax and Roth deferrals.
CurRothContri (Rate) — The employee’s current Roth contribution percentage. Sent under RothContributionRules node
CurRothContri (Amount) — The employee’s current Roth contribution amount. Sent under RothContributionRules node
MaxRothContri (Rate) — The maximum Roth contribution percentage allowed for a plan. Sent under RothContributionRules node
MaxRothContri (Amount) — The maximum Roth contribution amount allowed for a plan. Sent under RothContributionRules node

Transaction XML (Batch and Real-time)

As long as contributions are sent back in the transaction string and a Roth contribution rate/amount is proposed for a participant, the proposed Roth contribution will be sent in the elements below. If a plan is set to not allow for Roth contributions, the employee would not receive a Roth contribution rate/amount back in the transaction string. Employees who are sent with a status of “Termed” will have a transaction that excludes the Roth contribution from the transaction string.

RothContri (Rate) — This data point will be the employee’s proposed Roth contribution percentage.
RothContri (Amount) — This data point will be the employee’s annual proposed Roth contribution amount.

Data Validation

Participant Pre-Tax/Roth Contribution errors:

For Proposal (Statement) if a value is sent for maximum Roth contribution percentage, it should be less than or equal to 100% of the participant’s salary.
For all service options, if a value is sent for the Roth contribution percentage field, it should be less than or equal to the maximum Roth contribution percentage. We will assume the contribution percentage is capped once it reaches the plan max.
For all service options if the participant is sent with a current Roth contribution, the client configuration must be set to separate Roth contributions and the plan must allow for Roth contributions.
For all service options if Client is set up to send Roth separate from Pre-tax contributions and a plan is enabled for Roth, in the participant xml file all applicable information should be sent in the Roth node. Regardless of whether a user is making a Roth contribution, if a plan is enabled for Roth, all applicable information must be sent under the Roth node.

Plan level data validations:

For all service options the Roth flag should only be used when Roth Contributions are separated from Pre-tax contributions.
For all service options Roth contributions should only be sent for 401(k), 403(b), and Supplemental 403(b) plan types.
Sending the PreTax node when the plan allows for Roth is invalid.
Sending the Roth contribution node is not valid when the plan is not enabled with the Roth contribution type.

SMART

Under a SMART savings plan, our assumption is that the provider’s managed savings program systematically increases only the Pre-tax contribution. If the user is making a Roth contribution in addition to Pre-tax contributions being managed through their SMART program, we will only increase the Pre-tax contribution per the SMART configuration provided by the Client. We will assume no increase to Roth contributions in this scenario.

UI Changes

If the Client is set up to send Roth and Pre-tax contributions separately and the plan allows for Roth, the UI will display the annual Pre-tax contribution and the annual Roth contribution separately. If a value is not sent for Pre-tax or Roth contributions, the fields will still be displayed so that the user can enter this information. If a plan does not allow for Roth contributions, we will only display references to the annual Pre-tax contribution.

Samples

Plan enabled Roth (Pre-Tax Contribution only)

<RothContri>
	<PreTaxDefault>
		<Default>
			<MaxContri>
				<Rate>100</Rate>
			</MaxContri>
			<CurContri>
				<Rate>10</Rate>
			</CurContri>
		</Default>
	</PreTaxDefault>
</RothContri>

Roth, Post-Tax, and Pre-Tax Contribution

<PostTaxContri>
	<Default>
		<MaxContri>
			<Rate>25</Rate>
		</MaxContri>
		<CurContri>
			<Rate>2</Rate>
		</CurContri>
	</Default>
  </PostTaxContri>
  
<RothContri>
	<PreTaxDefault>
		<Default>
			<MaxContri>
				<Rate>25</Rate>
			</MaxContri>
			<CurContri>
				<Rate>10</Rate>
			</CurContri>
		</Default>
	</PreTaxDefault>
	<RothDefault>
		<Default>
			<MaxContri>
				<Rate>25</Rate>
			</MaxContri>
			<CurContri>
				<Rate>5</Rate>
			</CurContri>
		</Default>
	</RothDefault>
</RothContri>

Post-Tax and Pre-Tax Contribution when Roth is not enabled

<PreTaxContri>
	<Default>
		<MaxContri>
			<Rate>25</Rate>
		</MaxContri>
		<CurContri>
			<Rate>25</Rate>
		</CurContri>
	</Default>
</PreTaxContri>

<PostTaxContri>
	<Default>
		<MaxContri>
			<Rate>25</Rate>
		</MaxContri>
		<CurContri>
			<Rate>2</Rate>
		</CurContri>
	</Default>
</PostTaxContri>

Roth and Post-Tax Contribution

<PostTaxContri>
	<Default>
		<MaxContri>
			<Rate>25</Rate>
		</MaxContri>
		<CurContri>
			<Rate>2</Rate>
		</CurContri>
	</Default>
</PostTaxContri>

<RothContri>
	<RothDefault>
		<Default>
			<MaxContri>
				<Rate>25</Rate>
			</MaxContri>
			<CurContri>
				<Rate>5</Rate>
			</CurContri>
		</Default>
	</RothDefault>
</RothContri>

Roth and Pre-Tax Contribution

<RothContri>
	<PreTaxDefault>
		<Default>
			<MaxContri>
				<Rate>25</Rate>
			</MaxContri>
			<CurContri>
				<Rate>10</Rate>
			</CurContri>
		</Default>
	</PreTaxDefault>

	<RothDefault>
		<Default>
			<MaxContri>
				<Rate>25</Rate>
			</MaxContri>
			<CurContri>
				<Rate>5</Rate>
			</CurContri>
		</Default>
	</RothDefault>
</RothContri>

Pre-Tax Contribution when Roth is not enabled

<PreTaxContri>
	<Default>
		<MaxContri>
			<Rate>25</Rate>
		</MaxContri>
		<CurContri>
			<Rate>25/<Rate>
		</CurContri>
	</Default>
</PreTaxContri>

Post-Tax Contribution

<PostTaxContri>
	<Default>
		<MaxContri>
			<Rate>25</Rate>
		</MaxContri>
		<CurContri>
			<Rate>2</Rate>
		</CurContri>
	</Default>
</PostTaxContri>

Roth Contribution

<RothContri>
	<RothDefault>
		<Default>
			<MaxContri>
				<Rate>25</Rate>
			</MaxContri>
			<CurContri>
				<Rate>5</Rate>
			</CurContri>
		</Default>
	</RothDefault>
</RothContri>

# Plan and Participant Contribution Setup Samples

# Assumptions

# Schema

# XML Specifications

# Plan XML

# Participant XML (Batch and Real-time)

# Transaction XML (Batch and Real-time)

# Data Validation

# SMART

# UI Changes

# Samples