Mega Back Door Roth IRA - possible or not?

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bruingent
Posts: 33
Joined: Fri Aug 02, 2013 8:58 am

Mega Back Door Roth IRA - possible or not?

Post by bruingent » Wed Aug 15, 2018 5:11 pm

-I'm single and starting new as a physician, my company offers 403B, 401 (contains matching contribution) and 457B. I also have a Vanguard individual roth ira (which I already contributed $5500 for the year) and traditional ira ($0 balance as of now).

-I plan to contribute the maximum amount to my employer 403b and 457b plan then convert the pretax account to back door roth conversion. My question is how do I go about doing it?
-Does my employer need to have an employer roth account?
or
-Do I just take all the money from 403b and 457b account straight to my individual traditional ira account then immediately convert it to roth then fill out the form 8606? My understanding with this is in order to take out money from an employer account, you have to stop working there which won't be my case, I like where I work.

I think there is a gap in my knowledge, will you please help me figure this out? If you need more information then please just let me know.

Tu

retiredjg
Posts: 33524
Joined: Thu Jan 10, 2008 12:56 pm

Re: Mega Back Door Roth IRA - possible or not?

Post by retiredjg » Wed Aug 15, 2018 5:27 pm

Yes, there seems to be a gap in your understanding.

Your plan has to offer two things - the opportunity to make employee after tax contributions (this is different from Roth 401k) and the opportunity to roll that account to Roth 401k (in-plan Roth rollover) or out to Roth IRA.

Without both of those, you cannot do what you are wanting to do.

Have you checked to income limits to see if you can contribute directly to Roth IRA? There is a good chance you cannot because your salary may be too high. If so, you'll need to fix what you have done for this year.

bruingent
Posts: 33
Joined: Fri Aug 02, 2013 8:58 am

Re: Mega Back Door Roth IRA - possible or not?

Post by bruingent » Wed Aug 15, 2018 5:37 pm

Thank you so much for your reply, I really appreciate it.

-My individual roth contribution will be fine since I won't start working until October 1st, so I will be well below the limit.

retiredjg
"Your plan has to offer two things - the opportunity to make employee after tax contributions (this is different from Roth 401k) and the opportunity to roll that account to Roth 401k (in-plan Roth rollover) or out to Roth IRA."
-->So if I understand you correctly, there are two premises that had to be met in order to do employer back door roth ira conversion:
1) you are saying my employer has to offer "the opportunity to make employee after tax contributions" after I contributed to the pretax account of 403b and 457b?
2) you are also saying that in my employer has to offer the opporuntiy to roll the 403b and 457b into the roth 401k
3) Mute point, but this is all has to be done through the employer plan, correct?

Tu

retiredjg
Posts: 33524
Joined: Thu Jan 10, 2008 12:56 pm

Re: Mega Back Door Roth IRA - possible or not?

Post by retiredjg » Wed Aug 15, 2018 5:50 pm

bruingent wrote:
Wed Aug 15, 2018 5:37 pm
-->So if I understand you correctly, there are two premises that had to be met in order to do employer back door roth ira conversion:
1) you are saying my employer has to offer "the opportunity to make employee after tax contributions" after I contributed to the pretax account of 403b and 457b?
Your employer has to offer the opportunity to make aftertax contributions (which are not Roth contributions). It has nothing to do with making ordinary contributions first.

2) you are also saying that in my employer has to offer the opporuntiy to roll the 403b and 457b into the roth 401k
Sorry, I didn't mean 401k. Your employer might, or might not, offer you the ability to roll after tax 403b into Roth 403b. Or after tax 457b into Roth 457b.

3) Mute point, but this is all has to be done through the employer plan, correct?
The "mega back door" is only employee plans.

There is another thing called the "back door" that you can do - converting IRA to Roth IRA.

Spirit Rider
Posts: 8552
Joined: Fri Mar 02, 2007 2:39 pm

Re: Mega Back Door Roth IRA - possible or not?

Post by Spirit Rider » Wed Aug 15, 2018 6:09 pm

1) An employer can, but is not required to offer after-tax contributions. Those that do, can allow first dollar contributions or only when employee elective contributions are maxed.

2) An employer that allows designated Roth contributions can, but is not required to offer In-plan Roth Rollovers (IRR) from employee elective deferrals, vested employer contributions and after-tax contributions to the Roth designated account.

3) IRS regulations prohibit the in-service withdrawal/rollover of employee elective contributions and non-vested employer contributions prior to age 59 1/2. An employer can, but is not required to allow in-service withdrawals/rollovers of rollover contributions, employer contributions and employee after-tax contributions prior to age 59 1/2.

Only after-tax contributions followed by in-service rollovers to a Roth IRA are technically the Mega Backdoor Roth, but after-tax contributions followed by IRRs achieve a similar result
Last edited by Spirit Rider on Wed Aug 15, 2018 6:13 pm, edited 1 time in total.

bruingent
Posts: 33
Joined: Fri Aug 02, 2013 8:58 am

Re: Mega Back Door Roth IRA - possible or not?

Post by bruingent » Wed Aug 15, 2018 6:12 pm

Thank you, this helps a lot.

"There is another thing called the "back door" that you can do - converting IRA to Roth IRA."
Yes, but this is only $5500 per year, and I can do that through my individual plan which I will get it done next January.

So it would be pretty sad if my employer doesn't offer the roth option. I will have to check with them again.

Tu

Dottie57
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Joined: Thu May 19, 2016 5:43 pm

Re: Mega Back Door Roth IRA - possible or not?

Post by Dottie57 » Wed Aug 15, 2018 6:38 pm

bruingent wrote:
Wed Aug 15, 2018 6:12 pm
Thank you, this helps a lot.

"There is another thing called the "back door" that you can do - converting IRA to Roth IRA."
Yes, but this is only $5500 per year, and I can do that through my individual plan which I will get it done next January.

So it would be pretty sad if my employer doesn't offer the roth option. I will have to check with them again.

Tu
Many do not allow, so do not be surprised. My employer did not allow.
See if you can get a copy of the plans. “Plan Summary Document”

RIMDBogle
Posts: 82
Joined: Thu Jul 12, 2018 10:13 pm

Re: Mega Back Door Roth IRA - possible or not?

Post by RIMDBogle » Mon Aug 20, 2018 9:38 am

Good to see this thread.

What are the additional record keeping & IRS reporting (forms/Schedules/publications) to follow for Mega Back Door Roth IRA?

If I have solo 401K, Roth IRA, TIRA, am I able to use solo 401K and TIRA for Mega Back Door Roth IRA?

If we implement Mega Back Door Roth IRA in 2018, what is the rule for direct contributions for Roth IRA for that year (eg 2018)?

Thanks for sharing.

niceguy7376
Posts: 2100
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Mega Back Door Roth IRA - possible or not?

Post by niceguy7376 » Mon Aug 20, 2018 9:49 am

RIMDBogle wrote:
Mon Aug 20, 2018 9:38 am
If I have solo 401K, Roth IRA, TIRA, am I able to use solo 401K and TIRA for Mega Back Door Roth IRA?
Since your question/situation is different than OP, please start a new thread so that answers dont comingle.
In your case, your solo 401k should allow for the same (after tax and then rollover). Most standard solo 401ks dont allow these. Check with your solo 401k provider.

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