Roths don’t require workers to take distributions in retirement and can be passed along to heirs.

Fund Limits

The Medallion fund has been restricted mainly to RenTech employees since 2005 as the firm took steps to keep its size around $10 billion. The fund has historically averaged annualized returns approaching 80 percent before fees, but such gains can slump when it gets too big. Even employees face annual investment limits, and Medallion also typically distributes its profits every six months instead of reinvesting the gains.

In addition to the tax benefits, Renaissance employees who invest in Medallion through their IRAs are spared fees that the fund imposes on their taxable accounts. The fund charges a 5 percent management fee and a performance fee equaling as much as 44 percent of gains. As a result, employees are increasingly shifting their annual Medallion allocations into their IRAs, according to the filings with the Labor Department.

Big Advantage

The $87 million that employees initially allotted to the company IRA plan in 2012 swelled to $664 million by the end of 2017, including $574 million in Medallion, the filings show. In turn, the IRA money -- held by about 250 employees -- grew to more than 4 percent of Medallion’s gross assets from about 1 percent five years earlier.

“Roth IRAs are hugely tax advantaged,” said Len Burman, a co-founder of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. “If you are expecting to earn a rate of return of 20 percent or higher, it turns out to be a really good tax shelter.”

People with $100,000 or less in annual modified adjusted gross income could long convert traditional IRAs into Roths through a one-time tax payment. Those with higher incomes gained the same right when former President George W. Bush needed a revenue raiser to offset the cost of legislation extending favorable tax rates on dividends and long-term capital gains.

2005 Law

The Bush administration added a provision to the 2005 legislation eliminating the income cap on Roth conversions, effective 2010. The Congressional Budget Office estimated that the move would generate $9.2 billion of revenue from 2011 to 2013, as wealthy individuals jumped at the chance to pay an upfront tax to convert their traditional IRAs into Roths, thereby eliminating taxes on future gains.