Recently signed a new job with a new employer. Looking into our benefits, we have 401k options with Voya.
So right off the bat - I see in our investment options that we have After-tax contributions. Great. That is half of the battle. To my understanding, in order to do a Mega Backdoor ROTH I need:
1) Ability to do After Tax contributions
2) A plan that allows in-plan Roth conversions or in-service withdrawals.
#2 is where it gets tricky - I saw in the Plan Highlight section a terms for "In-Plan ROTH Conversions" so I immediately got excited.
See the bolded/underlined - Looks like it's only available for traditional (before tax) contributions If someone here interprets that differently please let me know.You can take the vested portion of your Plan account (other than existing Roth and after-tax contributions) and convert your pre-tax balances to Roth through an in-plan Roth conversion. The minimum amount you can convert is $1,000 and you are limited to two conversions in any Plan Year. IRS rules allow you to make in-plan Roth conversions regardless of withdrawal or distribution rights. They do not, however, allow you to convert required minimum distributions.
To request an in-plan Roth conversion, you must:
Complete the In-Plan Roth Conversion Request Form found in Forms
Taxes will not be withheld from your in-plan Roth conversion. When converting balances, you will need to identify other income sources to pay the tax. If you make an in-plan Roth conversion, you may need to increase your federal income tax withholding or make estimated tax payments to avoid an "underpayment of tax" penalty. You will need to determine if payments will be due to the IRS and make appropriate arrangements.
If you elect an in-plan Roth conversion, you will receive an IRS Form 1099-R reporting the amount converted as taxable income in that calendar year.
The in-plan Roth conversion feature is available to active and terminated participants. In addition, this feature is available for a former spouse that is an alternate payee under a Qualified Domestic Relations Order (QDRO) or to your surviving Spouse, if you die and your Spouse is your beneficiary under Plan rules. Due to legal restrictions, this feature is not available to non-spouse beneficiaries.
As with any Plan decision you make, the Company cannot provide you with tax advice. You are encouraged to speak with a qualified tax advisor before electing an in-plan Roth conversion as such elections cannot be undone once made.
So how about an in-service withdrawal? Next I see in the plan features a section titled "Withdrawal Options While Employed with the Company" perhaps there is something there...
There are several types of in-service withdrawals available through the Plan: Age 59½, traditional after-tax, Rollover Contribution, and Hardship (see details of each below). You can obtain available amounts for any of these withdrawals through your Account or by calling the Services Center at ###. If you want to learn more about withdrawals, visit “Getting Your Money” in the “Retirement” section of Education & Tools.
Age 59½ Withdrawals* can be taken from your before-tax and/or Roth 401(k) money and the vested portion of your Company matching contribution, if you are age 59½ or older. No forms are required.
Traditional After-tax Withdrawals* can be taken from your traditional after-tax money sources. No forms are required.
Rollover Withdrawals* can be taken from your before-tax and/or Roth rollover account. No forms are required.
Qualified Reservist Distributions* can be taken from your before-tax contributions.
Hardship Withdrawals** may be available for these reasons:
Expenses for unreimbursed medical expenses for participant, spouse, child, dependents or designated beneficiary;
Costs related to the purchase or construction of your primary residence (excluding mortgage payments);
Education/tuition payments for the next 12 months of post-secondary educations for you, your spouse, your children, your dependents or designated beneficiary;
Payment of amounts necessary to prevent eviction or foreclosure of a mortgage on your primary residence;
Funeral expenses for your deceased parent, spouse, child, dependents or designated beneficiary;
Certain expenses related to the repair of damage to your primary residence (such as hurricane or flood damage).
For hardship withdrawals processed on or before December 31, 2018, you cannot contribute to the Plan for a period of six (6) months. Your contributions will automatically be reinstated after the 6-month suspension period ends at the rate in effect immediately before such suspension began, including any automatic increase that would otherwise have gone into effect but for the suspension period.
For hardship withdrawal requests processed on or after January 1, 2019, you will no longer be required to obtain a Plan loan prior to requesting a hardship withdrawal, and your contributions will not be suspended following your hardship distribution unless you make an affirmative election to do so.
*Withdrawals from the Plan may be subject to 20% federal tax withholding and, if you are less than age 59½, a 10% early withdrawal penalty will apply. Ordinary income taxes may apply as well.
See the bold/underlined. It looks like I can withdraw the after-tax funds while still employed. But is it simply considered a withdrawal? Or can I then take that withdrawal check and deposit it into my ROTH IRA with Vanguard?
Any advice is greatly appreciated. While I also plan to call Voya and ask them, I hope to be better armed with the advice here and know the right questions to ask.