Can I Make A Mega Backdoor Roth IRA Contribution?

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), then rolling it out of their 401(k) into a Roth IRA. Under the right circumstances, this can allow the client to contribute tens of thousands of dollars into a Roth IRA. However, the rules are very restrictive and prohibitive for most clients, and can be difficult to navigate.

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 impact of the ACP test
  • 401(k) plan-specific features providing in-service distributions and/or separate accounts
  • The tax impact upon rollover
  • The step-by-step process to complete this kind of contribution

Updated for 5/1/2020