Roth 401(k) plans take off
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Since then, Roth 401(k)s have been taking off. According to a survey of 429 profit-sharing/401(k) plan sponsors conducted by the Profit Sharing/401(k) Council of America (PSCA) in early 2007, 22 percent of employers said they already offer the Roth 401(k), 9 percent say they will and 51.4 percent are considering the option.

Tom Foster, national spokesman for retirement plans at The Hartford, says that 2,670 of some 13,000 plans have implemented the Roth 401(k) option so far. He says the lag time caused by the sunset provision, compounded by a delay in getting regulatory matters defined by the Department of Labor, contributed to undue hesitation on the part of plan providers and employers alike.

Foster says the main obstacle preventing employers from offering the Roth 401(k) was the perception that it would be a record-keeping nightmare. "Who was going to keep track of the five-year rule and so on," he says. "But as I tell employers, the only real decision you have to make is whether you want it or not; we'll do all the leg work, all the reporting, we'll track the five-year rule, all that stuff. When they realize that they don't have any responsibility in tracking all this stuff and they realize this is a pretty good tool for their employees, then they come around."

Are you Roth 401(k) material?
Ted Roman, a fee-only financial adviser in San Diego, Calif., says he's high on Roth 401(k)s, even if most of his clients are not yet aware of them.

"I really like them for their flexibility. The fact that the money comes out tax-free is great. If you're going to be in the same or lower tax bracket when you put the money in than when you take the money out and you have a long enough time horizon, you're certainly going to come out ahead," he says.

Foster says one group sure to embrace Roth 401(k)s is the pool of highly compensated individuals who previously were locked out of Roth IRAs due to their income caps (in 2007, $114,000 for singles, $166,000 for a married couple filing jointly).

"The highly compensated people are saying, 'Wow, this is a great way for me to take some of the accumulation that was going to be taxable to me and my beneficiaries and create this tax-free accumulation bucket. It gives them some tax control on the other end," says Foster.

The other group that stands to benefit most from Roth 401(k)s are those just starting their careers, according to PSCA vice president Ed Ferrigno.