As promised, the MEGA back door Roth (and why it is likely irrelevant for you)

Our last post we talked about the back door Roth IRA. This time we are backing up the dump truck so we can load up on Roth contributions to our retirement (or likely not). The Mega Back Door Roth IRA is written about all the time. We frequently field calls from savers looking to get more money into their retirement plan. Most know the name of this approach but don't know the details. Unfortunately those details really matter and frequently kill this as a possibility.

First we need to talk about how money gets into a plan. There are employee deferrals that can be both pre-tax or Roth. There are employer contributions that can be matching or profit sharing. There are rollovers and if we get really in the weeds, there are QNEC's and QMAC's which can help fix discrimination testing errors. The Mega backdoor comes into play when a plan sponsor also offers after-tax contributions. These are NOT Roth contributions and are something that was available prior to 1997 when Roth came into play. The tax treatment wasn't as favorable as Roth but it was another way to possibly save.

The next thing we need to talk about is discrimination testing. If you make under 160K in the prior year (as of 2026), you don't run into issues with this testing. If you make over this and your plan is not a safe harbor, you probably know all to well that your fate is tied to the group of employees who are deemed non-highly compensated. What the Mega backdoor requires is another set of tests on something called an ACP test. Unless you work for an extremely large company or one that is made up almost exclusively of people making over that 160K limit to pass this rather obscure ACP test.

If all of that applies to you, then YES, you did it! You can possibly do the Mega Backdoor (if your employer makes this money source available). Now can you save up to 72K (or 80K if over 50) in a single year.