Does Vanguard Allow Mega Backdoor Roth in an i401K?

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Chicago60
Posts: 262
Joined: Tue Jan 29, 2013 3:40 pm

Does Vanguard Allow Mega Backdoor Roth in an i401K?

Post by Chicago60 » Thu Aug 04, 2016 2:11 pm

I opened a 401K at Vanguard this year as a sole proprietor and, as someone over 50, funded $24K with only the Roth component. I cannot find an answer to this question at the Vanguard website: can I contribute after tax money to the 401K and convert that contribution to a Roth?

Spirit Rider
Posts: 6600
Joined: Fri Mar 02, 2007 2:39 pm

Re: Does Vanguard Allow Mega Backdoor Roth in an i401K?

Post by Spirit Rider » Thu Aug 04, 2016 2:21 pm

Vanguard does not allow after-tax contributions to an individual participant 401k. Nor does any other mainstream provider.

Chicago60
Posts: 262
Joined: Tue Jan 29, 2013 3:40 pm

Re: Does Vanguard Allow Mega Backdoor Roth in an i401K?

Post by Chicago60 » Thu Aug 04, 2016 2:29 pm

Thanks for the reply.

CRTR
Posts: 26
Joined: Sat Apr 11, 2015 1:15 pm

Re: Does Vanguard Allow Mega Backdoor Roth in an i401K?

Post by CRTR » Thu Oct 12, 2017 2:11 pm

I spent about 2 hours on the phone with them ~2 years ago trying to get the same answer. I finally did . . .

Not if you use their turnkey i401k plan and doc. You can, however, use their small business plan. The issue is that it will cost you ~$2500, if I remember correctly (I may not). It wasn't a complete loss,however, in that they referred me to Ascensus.

There is another way you can do it. You can get a custom plan document through Ascensus (there are other TPAs out there that will do the same but the ones I know of are pricey). Use their full featured, Prototype Plan Document, not their i401k plan doc. It has been officially approved by the IRS. I'm not sure about some other providers out there now offering this. Open a custodial account at the brokerage of your choice, act as your own plan admin, do your own bookkeeping, paperwork (5500, etc). BTW, I would open 3 accounts: reg 401k, Roth 401k, after-tax contribs. It will simplify your bookkeeping. That will cost you ~$150/year.

tj
Posts: 1974
Joined: Thu Dec 24, 2009 12:10 am

Re: Does Vanguard Allow Mega Backdoor Roth in an i401K?

Post by tj » Sun Oct 15, 2017 9:28 pm

There are a fewer cheaper options, or at least there was as of 2014:

https://thefinancebuff.com/after-tax-co ... -401k.html

simas
Posts: 84
Joined: Wed Apr 04, 2007 5:50 pm

Re: Does Vanguard Allow Mega Backdoor Roth in an i401K?

Post by simas » Sun Oct 15, 2017 9:47 pm

I did the same search - Vanguard, Fidelity, Etrade, do not allow after tax non-Roth contributions from their plan documents.
Ended up with discountsolo401k, very reasonably (575 set up, 100 annually) , and Fidelity for non-prototype account. Everything I ever wanted out of the plan

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