solo 401(k) with Mega Back Door Roth

normally in those situations we recommend establishing a separate subaccount for Roth money, and conversion is done by election with accompanying physical movement of funds into a separate Roth account within the same plan.  Is there a problem with keeping all sources (both Roth and non-Roth) within a signle account and the "segregation" being done on the recordkeeping level only.  I think it is OK but wanted to hear the wisdom of other practitioners.  Are there any considerations I need to be thinking about?

I believe you are confusing the Mega Back Door Roth concept with an In-Plan Roth Conversion.

The following link delves into the Mega Back Door Roth concept:

http://cvsoci.al/MzGhkV9b

no, I do not belive I am.  You can do MBR in-plan (which I prefer) or outside of the plan to an IRA via in-service distributions.  My question relates to potential pitfalls related to maintaining the Roth subaccoint for IN-Plan conversions within the plan.

There is a requirement for a separate accounting for NECs, pre-tax elective deferrals, Roth deferrals, rollovers, after-tax contributions, QNECs... to be able to administer vesting rules, availability for withdrawals, and tax basis among other things.  There is no requirement for maintaining separate investment accounts.  The rules for crediting income to each sub-account must be clear since income factors into determining taxable versus non-taxable amounts upon distribution.

The biggest pitfall is when the recordkeeping system is not capable of tracking the separate accounting (including separate basis for some of the accounts).  Trying to compensate with a manual accounting process is very time consuming (no matter how proficient one's spreadsheet skills may be).

Thank you, Paul, for confirming my understanding.  For solo situation it is OK process especially if all deposits are made once a year in one shot.

While our recordkeeping system can certainly track the "sources" of money, we usually recommend actually setting up separate investment accounts to hold Roth and non-Roth assets, if for nothing else, to facilitate in-kind transfers upon distribution from the plan.

TPABob, I totally agree, having a separate investment account for Roth is much better.  In addition, it allows for more aggressive investment strategy of Roth money which is an additional value from the clinet perspective.  The problem is that some clients/advisors are not capable of handling the proper paperwork and moving the money process.  Therefore, we have been using one account approach until at least Roth account grows to a meaningfull size.