after-tax employee contributions - timing

A sole prop established a solo 401k plan in 2023, wants to include after-tax employee contributions and do the mega-backdoor Roth with it.

(1) do the after-tax contributions have to be deposited by 12/31/2023?

(2) Does the Roth conversion have to be done by 12/31/2023 as well in order to be applied towards the 2023 tax year?

Thank you

Election form has to be signed by 12/31/2023 and after-tax contributions deposited by 30 days after the end of the plan year to be counted for 415. Obviously can be done within the plan year as well, but deposit deadline is not the tax filing deadline.

Not sure what you mean in (2), but the 1099 should be created for the plan year in which the conversion occurs.

In order to recognized the ROTH conversion for 2023 they would need an election to make after tax, a deposit of said contribution, and an election and conversion all completed on or before 12/31/2023. You would then need to issue a 2023, 1099-R for the conversion.

If the election is made in December but the deposit is not made until January, then the earliest you could do a conversion is in 2024 since I do not believe you are allowed to "convert a receivable".

Thank you very much.

If the plan sponsor is a C corp or S corp, would the after-tax deposit deadline then be 12/31/23 to be considered a 2023 plan year contribution?

After tax contributions are employee contributions and unrelated to the business entity. Deadlines are the same.

For funding purposes then, after-tax contributions have the same deposit deadlines as 401k/Roth contributions, is that correct?

Sole props and partnerships (no W-2 involved) the deposit deadline is the date of the owners tax return, including extensions

But for S-Corps and C-Corps (W-2 is involved), isn't the deadline the usual "as soon as possible" or 15th business day requirement?

Thank you

On 1/25/2024 at 10:08 AM, Santo Gold said:

For funding purposes then, after-tax contributions have the same deposit deadlines as 401k/Roth contributions, is that correct?

Sole props and partnerships (no W-2 involved) the deposit deadline is the date of the owners tax return, including extensions

But for S-Corps and C-Corps (W-2 is involved), isn't the deadline the usual "as soon as possible" or 15th business day requirement?

Thank you

Short answer is (generally) no. Because after-tax contributions are almost always just written as personal checks. If they are withheld from payroll, my answer changes a bit, but I have 0 experience with any plan doing that.

So, as I said above, the election (to make an after tax contribution, not necessarily to have anything withheld) has to be done no later than 12/31 and the deposit has to take place by 1/30 to be counted in the prior year 415 limits.