Mega Backdoor Roth Solo 401k Ban Passes House Hurdle But Senate Sign Off Still Needed

UPDATE: Great News! The mega backdoor will not be banned for 2022 (LEARN MORE HERE) as President Biden announced on December 16 that the Build Back Better bill won’t get passed in 2021so you just need to adopt the solo 401k plan by December 31, 2021 so that you can make all solo 401k contribution types including the voluntary after-tax for 2021 by your business tax return due date plus extension in 2022.

As reported previously, the Mega Backdoor Roth Solo 401k and IRA bans that had been added back to the Build Back Better Act of 2021 were included in the version of the legislation that passed the House today.

While this is an important milestone for the legislation, there is still a ways to go legislatively.

The House vote sends the package to the Senate where it is expected to take up the legislation in December, and more importantly, not accept the House version “as is” – changes made in the Senate would then send the legislation back to the House for a final vote before sending it on to the President’s desk for signature.

In addition to possibly being removed from the Senate version of the legislation, it is possible that the legislation will be delayed until January given the concerns that enacting the spending package could exacerbate inflation concerns.

If the ban does go through this year, it may result in the ban of the mega backdoor Roth solo 401k by 12/31/2021 (this year); however, the ability to make annual Roth solo 401k contributions will not be impacted, which are currently at $19,500 per year plus $6,500 catch up for those age 50 or older. 

Stay tuned as we continue to monitor the legislation and keep you posted!

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About George Blower

I have the privilege of educating our clients about our products and services so that they can make informed and confident decisions about their financial future. Prior to joining My Solo 401k Financial, I served as the general counsel for a subsidiary of a Fortune 500 financial services company. Learn more about George Blower and My Solo 401k Financial >>

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