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At my old company where I was a W-2 employee I was on the 401k committee and worked to get everything necessary for this set up and was able to use the mega backdoor roth until I left. The main roadblock was that our Fidelity rep had no clue what we were talking about so we had to go up the food chain for a bit until we found someone who was very knowledgeable and helped everything get lined up. It still took roughly a year to convince the committee it was a good idea, work our way up, do simulations to assess the risk of failing a test as a result, and actually enable everything. Now its set up and working great and people continue to use it after I left. The main roadblocks are typically getting your 401k committee to understand it and also being able to pass the tests which gets harder w/ this enabled. We had a very high average income and a high contribution % so failing tests as a result wasn't an issue. After leaving that employer, I started my own company (2 owners, no employees). After business took off, I went to the effort of setting up our small business 401k to enable the mega backdoor roth. It took a few weeks and a few hundred dollars, but its a business expense which helps. Here are two blog posts I found very helpful for figuring that out: http://thefinancebuff.com/after-tax-contributions-in-solo-401k.html and http://thefinancebuff.com/executing-mega-backdoor-roth-in-solo-401k.html . My recommendation would be to use a TPA to set everything up and then take over it from there either immediately or after 1 year of having them manage it so you are familiar with the paperwork involved. One note: the 53k limit is per employer not per person unlike the 18k deferral. So while you can only do the 18k pretax deferral once, you can hit the 53k cap in multiple places if you have a side business or change employers or become self employed partway through the year. I strongly recommend taking advantage of this as long as its available. Obama has proposed eliminating this loophole in his last 2 budgets so it might go away at some point.
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Apr 3, 2016 18:06
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| # ¿ May 16, 2024 16:58 |
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