Mega Backdoor Roth is a powerful tax strategy available to eligible Ubiquity Single(k) plan sponsors. It allows you to contribute beyond the standard 401(k) limits by combining Voluntary After-Tax contributions with In-Plan Roth Conversions. It allows you to maximize your retirement savings (within applicable limits) while benefiting from tax-free growth in a Roth account. 

Note: This strategy is only available to non-record kept Single(k) (solo 401(k)) plans and requires a specific plan design. Please refer to your Service Agreement or contact us to confirm if your plan supports the Mega Backdoor Roth strategy. This strategy is not available to Single(k) Plus plans.

Who Can Use Mega Backdoor Roth?

This strategy is designed for:

  • Self-employed individuals or business owners with no common-law employees (Single(k) plan holders)
  • Plan sponsors whose Single(k) plans are set up to allow:
    • Voluntary After-Tax contributions
    • In-plan Roth conversions

Note: Single(k) Plus record-kept plans are not eligible for Mega Backdoor Roth at this time. 

Step-by-Step: How to Execute the Mega Backdoor Roth Contribution Strategy

To take full advantage of this strategy, follow these steps in order:

Step 1: Max Out Your Employee Deferrals

Contribute the annual IRS limit in pre-tax and/or Roth salary deferrals:

  • For 2025, the limit is $23,500, $31,000 if you're age 50 or older (includes catch-up contributions), or $34,750 if you're age 60-63 (includes super catch-up contributions) .

Step 2: Maximize Employer Contributions

Make the maximum employer (profit-sharing) contribution:

  • Generally up to 25% of your eligible compensation
  • If self-employed (Sole Proprietors/Single-Member LLCs), this is based on 20% of your net earnings (after self-employment tax deductions)

Step 3: Make a Voluntary After-Tax Contribution

Calculate the difference between the overall 415(c) annual limit and what you've already contributed through salary deferrals and employer contributions:

  • For 2025, the total limit is $70,000, $77,500 if age 50+ (including catch-up), or $81,250 if you're age 60-63 (includes super catch-up).
  • The remaining gap can be filled with Voluntary After-Tax contributions.

Tip: Make this contribution close in time to your in-plan Roth conversion to reduce the earnings subject to tax.

Step 4: Convert to Roth

Once the after-tax contribution is in your account, convert it to Roth:

  • You can perform an in-plan Roth conversion*, keeping the funds inside your Single(k) plan.
  • Alternatively, if you are age 59½ or older, you may choose to roll the funds out to a Roth IRA.

*Important: Before converting, you must have a Roth account established in the name of your Single(k) plan with your selected custodian. This is separate from your pre-tax 401(k) account.

Step 5: Pay Taxes on Applicable Earnings

At tax time:

  • You'll owe income tax on any earnings generated by your after-tax contribution before conversion.
  • If you included any pre-tax dollars, those amounts will also be taxed.

Key Mega Backdoor Roth Terms Defined

  • Voluntary After-Tax Contributions: Contributions made from your take-home pay after taxes, these follow plan contribution limits. These are different from Roth contributions, which grow tax-free but are subject to annual elective deferral limits. Voluntary after-tax contribution earnings are also taxable upon withdrawal. 
  • In-Plan Roth Conversion: A process where you move funds from a traditional 401(k) source (including voluntary after-tax) into the Roth source within the same plan.
  • Roth IRA Rollover: Moving assets from your 401(k) plan to a Roth IRA outside the plan. Only available if you meet age or distribution eligibility requirements.
  • 415(c) Limit: The total annual contribution limit for a 401(k) plan, including all employee and employer contributions. This is separate from the elective deferral limit.

Need Help?

If you’re unsure whether your plan supports the Mega Backdoor Roth strategy or need help setting up the necessary Roth account, please email us at singlek@myubiquity.com .