After Tax (Mega Roth)

[Kattdogg12]

Our firm has a lot of owner only so we tend to have alot of mega Roth conversions.  I can't seem to find a definitive answer on what the limit is when the plan is ONLY doing after tax -> Roth.  I've read alot of places that if you are 50 and over, then the limit is $77,500 for 2025 but the examples always include deferrals/Roth.  What about when it's solely after tax?  I read an AI response that said if it's only after tax, then the limit is just $70,000 because after tax is not subject to 402(g):  

• Elective deferrals = pre-tax 401(k) deferrals + Roth 401(k) deferrals (salary-reduction contributions subject to the 402(g) limit).

• After-tax (non-Roth) contributions = a different bucket under §415(c), not subject to 402(g), and not elective deferrals.

Thanks!

[BTG]

After-tax are subject to the overall 415(c) limit.  In order to exceed that, you would need to use catch-up deferrals (which are not subject to 415(c)).

Out of curiosity, from a plan design standpoint, if these are owner-only plans with no discrimination concerns, what is the benefit of making these as after-tax contributions in the first place?  Why not just max out everything (with deferrals and employer discretionary contributions) on a pretax basis and then do a Roth conversion each year?  Or use the new SECURE 2.0 rules to have them contributed on a Roth basis in the first place?

[justanotheradmin]

The owners might not have very high compensation. If person's earned income for plan purposes is $85,000 it will be hard to get a maximum contribution with just deferrals and employer. If the owners have personal taxable investment accounts with large balances, its a way to basically transfer $70,000 from that account into a Roth account each year. 

And then instead of sitting in a personal taxable investment account, the money sits in the plan as roth and grows tax free. 

I'm not a big fan personally, but that's what I hear from some that use it for that purpose. 

[David D]

You also need to check how the plan document defines After Tax Contributions. Many I have seen say that After Tax Contributions are made from Gross Wages paid to the employee during that tax year and withheld from pay, not submitted from other funds the participant may have access to. 

[Kattdogg12]

On 12/8/2025 at 1:58 PM, BTG said:

After-tax are subject to the overall 415(c) limit.  In order to exceed that, you would need to use catch-up deferrals (which are not subject to 415(c)).

Out of curiosity, from a plan design standpoint, if these are owner-only plans with no discrimination concerns, what is the benefit of making these as after-tax contributions in the first place?  Why not just max out everything (with deferrals and employer discretionary contributions) on a pretax basis and then do a Roth conversion each year?  Or use the new SECURE 2.0 rules to have them contributed on a Roth basis in the first place?

I believe it's because they don't need or want the tax deduction for the company.  They make the deposit and then immediately convert it to Roth and it doesn't affect their W-2/Sched C or K-1.  On a few of these it was because their wages were enough to go up to the max 415 limit but not enough to fully take advantage of the 404 limit.  So, they do the max def, PS and then the rest is after tax.  For example, comp is $80,000 - then they can only have $20,000 in employer and wouldn't be able to max out the 415 limit.  But they could do $31,000 in def, $20,000 PS and $19,500 after tax to get to $77,500.  

We have a few that are using the employer designated Roth but again if their wages are not enough, then they can't max. 

So, going back to your comment above, if there were no deferrals - could the after tax be funded for the full 415 limit PLUS catch-up or because there is no pretax/roth, it's limited to $70,000 for 2025? 

 

[Kattdogg12]

On 12/9/2025 at 1:33 PM, David D said:

You also need to check how the plan document defines After Tax Contributions. Many I have seen say that After Tax Contributions are made from Gross Wages paid to the employee during that tax year and withheld from pay, not submitted from other funds the participant may have access to. 

Many if not all of our clients that utilize this are self employed, so there's no pay to be withheld from.  But that is something I had never thought of.  Thanks for bringing that up. 

[David D]

28 minutes ago, Kattdogg12 said:

Many if not all of our clients that utilize this are self employed, so there's no pay to be withheld from.  But that is something I had never thought of.  Thanks for bringing that up. 

Absolutely.  My guess is that somewhere in the doc it would address self employed individuals, but not certain

[John Feldt ERPA CPC QPA]

On 12/16/2025 at 5:36 PM, Kattdogg12 said:

could the after tax be funded for the full 415 limit PLUS catch-up or because there is no pretax/roth, it's limited to $70,000 for 2025? 

 

Right, it can be funded as after tax only up to the lesser of 100% of compensation or the $70,000 dollar limit. The extra $7,500 catch-up is only available as a deferral.