non deductible contribution added to 401k

[thepensionmaven]

I'm not sure whether to post this in 401k, DB or this message board.

 

We administer a combination 401k/new comp PS/ cash balance DB  (non- PBGC)

Accountant telling me another client sponsors same type of plan design, but his client is also doubling the max by contributing non-deductible as well.

Unless I'm missing something here, aren't the non-deductible contributions considered Roth and therefore excess contributions??

 

 

[C. B. Zeller]

In a non-PBGC combo, the maximum deduction on the DC plan is usually 6% of comp. At maximum comp, that means the total contribution to the DC plan will usually be $19,500 (deferrals) + $6,500 (catch-up) + $18,300 (6% of 305,000) = $44,300.

If they are ok with Roth contributions, what you could do is contribute $61,000 - $19,500 - $18,300 = $23,200 as voluntary after-tax contributions and then immediately do an in-plan Roth conversion on that amount. That lets you get your total contributions up to the 415(c) limit. 

Of course, voluntary contributions are subject to the ACP test, so this design falls apart if there are any NHCEs in the plan. It also only makes sense if they want to do Roth contributions, which will not appeal to everyone.

[CuseFan]

Precisely, just went through all this with a colleague yesterday. 

Solo or HCE-only plans - no reason not to allow this.

But any NHCEs - fugediboutit!

[Paul I]

In a nutshell, if you are an avid (rabid maybe) fan of maximizing Roth and have a non-PBGC combo, you can have Roth contributions up to the maximum annual additions limit in the 401(k) using the conversion of after-tax to Roth and the new SECURE 2.0 provision (if the plan allows) conversion of the NEC to Roth.