(Dow Jones) Small-business owners are tapping pre-tax individual retirement accounts and profit-sharing plans in search of assets to roll over into Roth IRAs.

Many are in a rush to move the funds before tax rates rise. Some want to use business losses from the recent downturn to offset the taxes they would otherwise need to pay when moving tax-deferred assets into a Roth IRA.

Professionals caution that the decision shouldn't be taken lightly because it could have a significant impact on the plan and employees. "You don't operate a plan just for the founder of the company," says Mark Ritter, Atlanta practice leader for Grant Thornton LLP. "You need to think about all the employees in the plan and what's best for them."

This is the first year that individuals earning more than $100,000 can put money in a Roth IRA. Growth in the accounts is not taxed, so paying taxes now and moving money there can be advantageous for high earners as tax rates rise.

Also, owners of Roth IRAs aren't obligated to start withdrawing a certain amount of their savings when they reach age 70 1/2. That can mean more savings for later in retirement or for heirs.

"A lot of people are very fearful that tax rates are going to go up," says Dan Kravitz, president of Kravitz, Inc., which designs and administers retirement plans. He says some business owners are so eager to move assets into a Roth that they're asking whether they could temporarily shut down the company 401(k) plan, which might enable them to withdraw savings they normally can't when they're younger than 59 1/2.

Kravitz advises against such a termination for a number of reasons, among them extra fees and the requirement that a business wait at least 12 months to start a new plan.

Instead, advisors are recommending that business owners look at their investments in SEP-IRAs and SIMPLE-IRA plans. Businesses also can amend their profit-sharing plans to allow qualified withdrawals, and some are doing just that.

Chad Terry, director of Retirement Solutions, Principal Financial Group, says small business owners who suffered losses can offset the taxes they would have to pay on the tax deferred retirement savings before they could be rolled over into a Roth IRA.

One concern that Ritter of Grant Thornton has with the rollovers is that, while top earners likely follow through, some rank-and-file worker might instead opt to pay the 10% tax penalty and spend some of their savings on, say, a car instead of keeping it sheltered for retirement. Also, if the assets in a profit-sharing plan dwindle, the expenses can go up, he says.


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