After spending time with Apple Support who told me it was NOT possible, my genius of a husband explained how:
1) Open iTunes with iPhone device connected
2) Go to the playlist "On my Device" - select it
3) Go to File > Library > Export Playlist...
4) Select folder where to save playlist and name the file (it will be saved as a .txt file, or you can choose a different file format.)
5) Go back to iTunes and go to File > Library > Import Playlist...
6) Navigate to same folder and select the file you just saved.
Voila - Playlist will appear in your library (as long as your library has all the same songs as on your phone.)
Note: I don't understand why the new iTunes doesn't have this option if you right click on a playlist, but it works. The apple support guy was confused too. He literally told me that I have to use an external program or iphone app to do this.