post-Tax 401A convert to Roth IRA

Submitted by Hongyuan Wen on Wed, 2016-11-23 19:02

Do you know what is the income limit for this conversion? Also, how much we could contribute to this post-tax 401A account for doing this conversion each year?
Thank you



Submitted by Alan - IRA critic on Wed, 2016-11-23 20:59

The plan provisions determine how much you can contribute after tax. There is an overall annual limit of 53k (54k for 2017) that includes pre tax contributions, and Roth contributions, any employer match or forfeitures and you allowed employee contributions. In addition, the plan may further limit contributions due to ACP testing concerns to make sure employees due not trigger an excess annual additions problem. There are no income limits for making these employee after tax contributions or rolling the after tax balance over to a Roth IRA or into the plan Roth option if the plan offers in plan Roth rollovers.



Submitted by Hongyuan Wen on Wed, 2016-11-23 22:18

thank you very much for your reply.  I was told by a fidelity rep that the income limit is $120,000, if your income is higher than that, you can only do 3% employee match, which our company do require us in order to get their match and you can only convert your 3% to roth IRA, but I could not find any written statement any where about this limit.  Do you mind tel me where do you get the no income limit for the conversion to roth with $53000 contribution?  



Submitted by Alan - IRA critic on Wed, 2016-11-23 23:56

The 120,000 limit is one way of defining an HCE (a highly compensated employee). Perhaps this is a safe harbor plan. If the plan also offers “employee contribution” option for after tax contributions, you may be able to make those contributions and convert them with no income limit for the conversion. However, employee contributions make the plan subject to the ACP discrimination test, so if you are allowed to make after tax contributions and roll them to your Roth IRA right away and then the plan fails the ACP test, you will have excess contributions and an excess contribution to the Roth IRA. The testing rules for firms with HCEs are very complex and the various tests are designed to eliminate the HCEs from making most of the plan contributions. Fidelity is likely correct in what they are telling you.



Submitted by William Tuttle on Fri, 2016-11-25 03:43

  • Alan, I thought the ACP test was based on employer contributions + forfeitures + employeee after-tax contributions. It would require an NHCE ACP 0% for there to be an HCE maximum of 0%. This seems very unlikely with an employer match of 3%. Assume the NHCE ACP was actually 3% (3% employer match, no refunded forfeitures, and no after-tax contributions), that would result is an HCE maximum of 5% (3% + 2%). This would allow an HCE after-tax contribution of 2%. It seems much more likely that one or more of the following was true:
  • The Fidelity CSR misunderstood the OP’s question
  • The OP misunderstood the the Fidelity CSR’s answer
  • The Fidelity CSR was wrong uninformed/incorrect
  • The plan does not support after-tax contributions


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