voluntary contribuitons

[52626]

For those of us still working, I have a question,

a recent article in the Wall Street Journal talked about "pumping up your IRA".

While I can follow all the data and logic presented in the article, I have a question.

Client has a 401(k) Plan - participants can defer pre or Roth. There is a match of 100% up to 6% of compensation.

According to the article, participants who defer the max ( $18,000/$24,000) could make an after tax contribution (assuming plan allows for voluntary contributions) and as long as the total allocation does not exceed $52,000/$57,000) they are all set.

The article is addressing the ability to roll the voluntary account over to a Roth IRA and all the tax savings afforded to the Roth IRA.

Here is my question- most plans removed the voluntary contributions since they needed to satisfy the ACP test. Is this condition still applicable??

While the article made it sound great to add voluntary contributions, and my client is ready to jump all over this, I think, the crucial issue of ACP testing was eliminated from the article.

thanks and happy new year.

[Lou S.]

ACP still applies. Works great in 1 man plan though. I think a few thread on here go into it in detail.

[52626]

what is client had a 403(b) plan - deferrals only. could they add voluntary contributions?

Since this is a non ERISA plan, would it get a pass on the ACP testing of the voluntary contribution??

[Lou S.]

what is client had a 403(b) plan - deferrals only. could they add voluntary contributions?

Since this is a non ERISA plan, would it get a pass on the ACP testing of the voluntary contribution??

don't think so. while 403(b) gets a free pass on ADP, I'm pretty sure ACP still applies but I don't work with 403(b)s so haven't checked the rules in a while.

[austin3515]

ACP Test still applies. I have a feeling after-tax would probably subject the plan to ERISA too, you'd have to read the fine print of the ERISA exemption. Might be limited to collecting salary deferrals and remitting to custodian.

[austin3515]

29 CFR 2510.3-2
(f) Tax sheltered annuities. For the purpose of title I of the Act and this chapter, a program for the purchase of an annuity contract or the establishment of a custodial account described in section 403(b) of the Internal Revenue Code of 1954 (the Code), pursuant to salary reduction agreements or agreements to forego an increase in salary, which meets the requirements of 26 CFR 1.403(b)-1(b)(3) shall not be “established or maintained by an employer” as that phrase is used in the definition of the terms “employee pension benefit plan” and “pension plan” if

I think after-tax would sink you ERISA exemption.