Empower Your Clients: After-Tax Contributions & In-Plan Roth Conversions

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Key Advantages for Your Clients
  • Expanded Savings Opportunities: After-tax contributions allow participants to save beyond standard deferral limits, appealing especially to highly compensated employees. These contributions, when converted to Roth via IPRC, offer the potential for tax-free growth.
  • Strategic Tax Planning: Prompt conversion of after-tax funds to Roth can minimize tax liability on earnings, supporting participants’ long-term financial goals.
Compliance Considerations
  • Adding after-tax and IPRC features introduces compliance complexities, particularly ACP testing. Plans with a high proportion of highly compensated employees may face challenges in passing these tests. Safe harbor plans may also require additional testing if after-tax contributions are added.
Broker Guidance: Feasibility and Implementation
  • Advise clients to conduct a thorough feasibility analysis, considering recent ADP/ACP testing, plan type, eligibility rules, and employer contribution structures.
  • Recommend setting initial low limits on after-tax contributions to gauge interest and manage compliance risks.
Partnering for Success

CPS Employer Benefits provides technical expertise and consulting support to help brokers and their clients evaluate and implement these plan enhancements effectively. Connect with Jim Moore, Vice President of Retirement Services, at (949) 225-7145 or jmoore@cpsbenefits.com to ensure your clients’ plans are compliant, competitive, and positioned for participant success.