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 Can I Make a Backdoor Roth IRA Contribution?

FLOWCHART

In certain cases, clients may be eligible to make a Mega Backdoor Roth 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 Contribution?” flowchart. It addresses some of the most common issues that arise for a client trying to make a Mega Backdoor Roth 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

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