The IRA Pro Rata Rules Do Not Affect Self-Directed Solo 401k After-Tax Back Door Contributions

Voluntary after-tax contributions to 401k plans including solo 401k plans can be made whether or not the participant had previously made IRA after-tax contributions. The same is true if the participant plans to make new after-tax contributions (non-deductible) to an IRA. Reason being, a 401k is a qualified plan while an IRA is not.

What is more, when voluntary after-tax contributions are converted from a 401k including a self-directed solo 401k plan, to a Roth IRA or to the Roth Solo 401k designated account, the IRA pro rata rules (in addition to Traditional IRAs, this includes, SEP IRAs and SIMPLE IRAs) do not come into play. Reason being again a 401k is a qualified plan not an IRA so the idiom comparing apples to oranges comes into play.

To learn more about the IRA pro rat rules see (IRC Sec. 408(d) and IRC Sec. 408(o)).

About Mark Nolan

Each day I speak with energetic entrepreneurs looking to take the plunge into a new venture and small business owners eager to take control of their retirement savings. I am passionate about helping others find their financial independence. Having worked for over 20 years with some of the top retirement account custodian and insurance companies I have a deep and extensive knowledge of the complexities of self-directed 401ks and IRAs as well as retirement plan regulations. Learn more about Mark Nolan and My Solo 401k Financial >>


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