Does ERISA Law Support Employee Making After-Tax Contributions to 401K In Excess of Roth 401K Limits?

Yes it is correct. After-tax contributions have been allowed for some time. The ability to rollover the after-tax portion of a 401K (403b and

The reason you have been unable to find a 401K administrator that supports it, is because your typical 401K does not have the following two provisions:

?1. The plan allows for after-tax provisions and

1. The plan allows for in service distributions or non-hardship withdrawals.

Many 401K plans allow for hardship withdrawals and loans and many allow for after-tax contributions but not the two mentioned above. Employees who are contributing to 401K with after-tax contributions now upon retiring or separating from service can rollover the after-tax amount to a Roth.

Technically, you would not need to allow for in service distributions and non-hardship withdrawals in order to enable after-tax provisions?

What is the point of limiting the employees after-tax contribution to the Roth 401K component to $18K/$24K since enabling after-tax contributions basically makes it possible for the employee to contribute $53K/year into the 401K as after-tax money?

I assume that the $53K is limited to the amount of earned W2 income, so an employee making $40K / year is not going to be able to contribute more than $40K into the after-tax component of the 401K?

So your point on not finding administrators to support these plan provisions is that since most plan sponsors never ask for the provisions, most administrators do not know they exist? They seem like quite important provisions and that is strange that more companies do not ask for them.

The provisions stand by themselves.

We are not discussing Roth 401ks. We are discussing the subject of the article... namely maximizing a backdoor Roth IRA contribution if you have a 401K plan with your employer that allows after-tax contributions and in-service distributions. A plan that allows after-tax contributions provides the ability to isolate those contributions in order to roll them over to a traditional IRA to allow a back door Roth contribution. All of this is based on the assumptions given in the article that you don't have any pre-tax traditional IRAs.

An employee's contribution to a 401K is based on withholding and the plan limitations.

My point is simply that most 401K plans do not have the required provisions to perform a "mega back door" Roth contribution. I have drawn no conclusions on the reasons why.

My fault for not making my assumptions clear. The article I quoted was focused on a way to take out the pre-tax money from 401K and turn that into a larger Roth. I don't actually care about that. Because ultimately the pre-tax money will maintain the same tax status just staying in the 401K. What I cared about was that a 401K could be designed that would let an employee put away $53K of after-tax money into a 401K. That's a very big deal by itself, and I was simply trying to understand why you don't see a plan provision to enable that alone more often.

According to the article below, 42% of 401k plans allow for after-tax contributions. There is no citation for the source of that stat.

I suspect it may be 42% of the plans, but almost all of those are small plans, that cover a tiny percentage of all 401k participants. Doesn't allowing after tax contributions kill the safe harbor?