Can I Make A Mega Backdoor Roth IRA Contribution?

Categories: 401(k), Roth IRA

In certain cases, clients may be eligible to make a Mega Backdoor Roth IRA contribution. At a high level, this involves a client making a non-Roth, after-tax contribution to their 401(k), rolling it out of their 401(k) plan and into a Roth IRA. Under the right circumstances, this can allow the client to contribute tens of thousands of dollars into a Roth IRA. The issue is that the rules are very restrictive and prohibitive for most clients.

To help make the analysis easier, we have created the “Can I Make A Mega Backdoor Roth IRA Contribution?” flowchart. It addresses some of the most common issues that arise for a client trying to make a Mega Backdoor Roth IRA contribution. This flowchart considers:

  • The maximum amount that can be contributed
  • The step-by-step process to complete this kind of contribution
  • Impact of ACP test
  • Impact of the plan allowing in-service distributions
  • Impact of the plan having “separate accounts”
  • Tax impact upon the rollover

Updated 2019