mega backdoor roth

[sltol77]

to preface this thread:

understanding that profit sharing contribution amount to an individual 401k is limited by the existence of a cash balance plan and

assuming my individual 401k allows in service non hardship distributions and that I'm able to make after tax contributions to my 401k...

am I allowed to contribute AFTER tax money to the 401k up to the $55000 limit for 2018 and then do a mega backdoor roth conversion?  or does the existence of the cash balance plan still limit the allowed total amount that I can contribute to the 401k (even if it's on a nondeductible basis)

for example:

401k:  employee contribution $18500, profit sharing $16200  ($55000 - 18500 - 16200 = $20300)

so, am I allowed to make a $20300 after tax contribution to the 401k with a plan to do the conversion?

 

 

[wawot1]

I believe that is correct

[Peds]

yes but you need a solo 401k that allows this.

[jacoavlu]

Good question. My guess is “probably” but that’s not good enough.

Who determines your contribution amount to the CBP? And profit sharing? This would be a good question to run by them.

Also, await more educated responses from spiritrider and Kon Litovsky

[Molar Mechanic]

401k has to be written to allow it, though if you control it that is just a signature away.

Check with your tpa to make sure it won't affect testing, though mine had no issues.

$18,500 + profit sharing + x = $55,000 for 2018.

If your spouse is employed, she can do the same.

Still waiting for the distribution to clear, but we put around $55,000 into mega Roth this month.

[jacoavlu]

Molar Mechanic wrote:

401k has to be written to allow it, though if you control it that is just a signature away.

Check with your tpa to make sure it won’t affect testing, though mine had no issues.

$18,500 + profit sharing + x = $55,000 for 2018.

If your spouse is employed, she can do the same.

Still waiting for the distribution to clear, but we put around $55,000 into mega Roth this month.

Click to expand...

You have a plan that includes multiple employees yes? I’m curious to hear follow up next year, after plan testing. Are you doing in plan Roth rollover?

[Molar Mechanic]

Correct. I know you got a different result from your plan administrator.

All I know is we pay significant money to them and I trust their advice. Our numbers don't change significantly year to year. She says we could have done it this year if we'd gotten the money put away in 2017.

[HumbleInvestor]

Are you rolling over all of your funds from 401K in to an IRA/RothIRA and moving IRA contributions back to 401K? I am interested in learning the logistics as I am our plans admin/sponsor and looking to make the required changes if its feasible. It currently allows after tax contributions but does not allow in service distributions. Testing is also a concern and we have other non HCE participants now.

[DMFA]

The plan needs:
- employee non-Roth after-tax contributions
Plus either one of the following:
- in-plan Roth conversions, such as a Roth 401(k)
- non-hardship in-service withdrawals, e.g. to rollover to Roth IRA

...I'm not sure either one of those last two provisions would be expected to cause a testing failure since I don't think it discriminates against NHCEs per se. I think that's more related to employer contributions.

[jacoavlu]

It is the after tax contributions that can cause trouble with plan testing. Any after-tax employee contributions are subject to the ACP test--if no NonHighly Compensated participants take advantage of this feature, the test would fail every year, which means your contribution would have to be refunded to you. That’s my understanding anyway. There is no Safe Harbor plan design for after-tax contributions.