After Tax Contributions vs ROTH Contributions
This is a 2 part question.
Client works for 2 employers. ONe has a 401k plan and another a 403b plan.
Can she max out at $19,500 at each employer? I have a feeling the answer is no.
Second,
She mentioned she has a chance to contribute in a post tax ROTH. I need to clarify with her if she means a ROTH plan or if she is referring to after tax contributions.
If we figure it is an After tax contributions opportunity can she contribute beyond the $19,500 in to the after tax account at work? If so, how much can she set aside in an after tax account at her employer?
Thanks
Permalink Submitted by Alan - IRA critic on Thu, 2021-09-02 21:10
You are correct. The elective deferral limit is 19,500 per taxpayer, not per plan (unless a 457b is offered). If she can select Roth 401k or 403b contributions, that also is subject to the 19,500 total limit, but if the after tax contributions are non Roth to an after tax sub account, the 19,500 limit does not apply to them. The limit for that particular 401k or 403b account is 58,000 per unrelated employer plan, but the plan may not allow employee to contribute to the full limit to avoid failing discrimination testing. She needs to verify whether these contributions are Roth or non Roth after tax, and if non Roth ask the plan how much she is allowed to contribute. If non Roth, she may be able to do a “mega back door Roth” in which she makes the after tax contributions then periodically rolls them tax free (except for small gains) into her Roth IRA or to the Roth portion of the same plan. The object is to get the after tax contributions into a Roth account as soon as possible so that future gains will be Roth gains.