Why it can be a good idea to add an after-tax contribution option to a 401(k) or a 403(b) plan

Tip of the day

Do the following statements pertain to your 401(k) or 403(b) plan?

  • Your plan does not have a problem passing the ACP discrimination test.

  • You have  plan participants who usually reach the maximum 402(g) limits ($18,000 for under age 50 and $24,000 for age 50 and older in 2015) on their Pre-tax or Roth-elective deferral contributions, and who would like to contribute more to the plan if they could.

If the answer to the above points is yes, then you may want to consider adding an After-Tax Contribution option to the plan.

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