A mega backdoor Roth is a strategy some Ernst & Young employees who have already maxed out their regular 401(k) deferral can use to put meaningfully more money into Roth savings each year. It depends entirely on what a specific plan allows, so it does not work the same way, or at all, in every plan.

What is the mega backdoor Roth strategy?

The strategy starts with after-tax employee contributions, a separate contribution type from the regular pretax or Roth elective deferral most people think of first.

Once that after-tax money is in the plan, the saver moves it into Roth, either through an in-plan Roth conversion or a rollover to a Roth IRA, generally as soon as practical so little investment growth has had time to build up on it.

What 2026 contribution ceiling leaves space for the extra after-tax money?

The regular elective deferral limit for a 401(k) is $24,500 for 2026, covering pretax and Roth deferrals combined; after-tax contributions sit outside that limit.

Workers 50 and older can add a catch-up of $8,000, or $11,250 instead for someone turning 60 through 63 during the year.

What actually leaves space for after-tax money is the overall limit on everything going into the account: the lesser of 100% of pay or $72,000 for 2026, rising to $80,000 with the regular catch-up or $83,250 with the age 60-63 catch-up, with compensation itself capped at $360,000 for this purpose. The gap between the elective-deferral limit and this overall limit, after subtracting any employer match or other contributions, is roughly how much a saver can put in after tax.

What does the plan itself have to allow?

A 401(k) plan is not required to accept after-tax contributions, and one that does must pass an annual nondiscrimination test on them: the Actual Contribution Percentage (ACP) test, which compares how much highly compensated employees put in as after-tax and matching contributions against everyone else, generally capping HCEs at the greater of 125% of the non-highly-compensated group's rate, or the lesser of double that rate or that rate plus 2 percentage points. A plan that fails the test typically has to refund the excess to the affected highly paid employees; the refunded after-tax contributions themselves were already taxed, but the earnings on them are taxable income. For 2026, the pay threshold used to identify a highly compensated employee stays at $160,000.

The plan also has to allow the money to move quickly. Elective deferrals can only come out in-service on specific events the plan names, such as reaching age 59 1/2 or hardship, a federal timing restriction that by its terms reaches only elective deferrals and not employee after-tax contributions. A plan's own written terms set when after-tax contributions can be withdrawn, and a plan can also offer an in-plan Roth conversion that does not require a separate distributable event at all.

How does moving the money into Roth actually work?

An in-plan Roth rollover shifts non-Roth money, including after-tax contributions and their earnings, into the designated Roth account inside the same plan if the plan offers that option. The taxable amount, ordinarily just the earnings portion when after-tax money is converted quickly, is included in income for the year of the rollover; it avoids the 10% early-withdrawal tax at the time of the conversion, though pulling that converted money back out within a 5-taxable-year window can trigger the tax after all.

What tax issue comes up when splitting a distribution between accounts?

A saver who instead rolls the after-tax money straight to a Roth IRA while sending other money to a traditional IRA runs into a specific IRS allocation rule. Guidance from the IRS lets the pretax portion of a combined distribution be assigned first to whatever is rolled to a traditional account, so the after-tax contribution itself can land in the Roth IRA close to free of further tax. Any earnings that built up on the after-tax money before that split happens are pretax, though, and become taxable if they end up on the Roth side instead of the traditional side.

When can that Roth money eventually come out without owing more tax?

A qualified distribution from the Roth money generally needs a 5-taxable-year holding period plus a withdrawal at or after age 59 1/2, or on account of death or disability (a Roth IRA also allows a limited first-time home purchase). Miss either part and the earnings portion of the withdrawal is taxable, while the already-taxed contribution is not.

Whether any of this is worth pursuing for a given Ernst & Young employee comes down to the specific plan: whether it offers a Roth feature at all, how its match and after-tax provisions are written, and what withdrawal options actually move the money fast enough to matter.

What Does Ernst & Young's Plan Allow for After-Tax Contributions and In-Plan Roth Conversions?

Ernst & Young's own plan document, not a general rule, spells out whether that after-tax and Roth path is open to its staff. The Ernst & Young Retirement Savings Plan (EIN 34-6565596, Plan No. 112) lets participants put up to 30% of credited compensation into pretax 401(k) or after-tax Roth 401(k) deferrals, and the Firm matches 25% of the first 6% of pay after one year of service, rising to 50% of the first 6% after four or more years. Beginning January 1, 2025, the plan also opened a separate after-tax, non-Roth contribution source: eligible members below partner level, plus partners or principals age 45 or younger, may elect up to 30% of pay as after-tax money, capped at $15,000 a year, in addition to the regular deferral, within the plan's overall 2025 annual-addition limit of $70,000. Since that same date, every plan participant has had the option to convert some or all of their pretax or after-tax plan balances into Roth money through a Roth In-Plan Conversion. A participant may also withdraw plan money for a hardship or once they reach age 59 1/2. Whether the after-tax room and conversion timing line up for a given Ernst & Young employee is worth confirming against the current plan year's limits with the Benefits Center.