Solo 401k in plan Roth Conversion
We have a Solo 401k client that is wanting to make after tax contributions for Super Roth purposes. Client over age 50. The numbers are $26,000 Employee Deferral $23,000 of profit share based on the Schedule C income and the remaining amount in after tax, $15,500. Total earned income over the direct Roth contribution amount. Two questions.
1. The after tax is not a profit sharing contribution percentage, it could be 100% of net income.
2. Does an in plan Roth conversion count for the aggregation rule of IRAs and affect his Back Door Roth outside the plan? Basically can he have an IRA, do the back door Roth and also do in plan Super Roth.
Thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2021-04-19 16:37
Yes, but client needs to be sure that the plan document allows after tax contributions and if client intends to do an in plan Roth rollover (IRR) that the plan also supports that. IRRs and after tax contributions come with increased plan accounting requirements. Or client might want to roll the after tax contributions and their earnings out to a Roth IRA.
This has no effect on a regular back door Roth contribution as it is not an IRA plan. Client can do both.