New Update: Healthcare Costs Increasing by Over 60% in Some States. Will you be impacted?

Unlocking the Benefits of a Mega Roth IRA for Arconic Employees: A Pathway to Enhanced Retirement Savings

Healthcare Provider Update: Healthcare Provider for Arconic Arconic, a leading provider of aluminum and aerospace products, collaborates with various insurance companies to offer healthcare benefits to its employees. The primary healthcare providers that partner with Arconic vary by location and include well-known insurers like UnitedHealthcare, Aetna, and Blue Cross Blue Shield, among others. Healthcare Cost Increases in 2026 In 2026, healthcare costs are expected to rise significantly, impacting employers and employees alike, including those at Arconic. The projected average increase in health benefit costs could reach nearly 8.5%, attributed to a perfect storm of higher medical expenses and the potential expiration of enhanced federal premium subsidies from the Affordable Care Act (ACA). Many employers are responding by considering changes to plan designs that shift more costs to employees. This could lead to out-of-pocket premium increases that may exceed 75% for a large portion of the workforce, making it critical for companies like Arconic to strategize their healthcare offerings effectively to mitigate financial impacts on their employees. Click here to learn more

The mega backdoor Roth IRA is a strategy ‘highly compensated employees’ or HCEs at Arconic can use to increase retirement savings and shelter investment growth from taxes in retirement.

When circumstances are right and the stars align, this little-known strategy can be a smart way to tuck extra money into a Roth IRA to use for retirement or to save for your heirs.

Let’s start with the basics.

Retirement Savings 101

When you choose to make Roth contributions, you’ll contribute to your account with after-tax dollars. This means you will pay taxes on the money the year it is earned, and you won’t benefit from any tax advantages at the time you contribute.

In exchange, you won’t owe any taxes on your contributions or when you withdraw in the future. Additionally, as long as your Roth contributions have “aged” for at least five years, any earnings your contributions accrue won’t be taxed either. (That said, if Arconic made any contributions, you’ll still need to pay taxes on those when you withdraw, since you won’t have paid taxes on those contributions yet. Contributions made by Arconic are always traditional, pre-tax contributions.)

The 2022 limits have changed since last year. A person younger than 50 can contribute $20,500 into their 401(k). People who are aged 50 and older can contribute an additional $6,500 annually in catch-up contributions, for a total of $27,000 into their 401(k). Limits for total employee and employer contributions have also increased over the past year and are $61,000 (or $67,600 for people 50 and older).

Some company 401(k) plans are structured to allow for additional after-tax contributions, which can create a “mega backdoor” through which you can invest up to an extra $40,500 into your Roth IRA or Roth 401(k).

We’ll walk you through how it works and if it’s a good move for you, but know now that this is complicated and advanced financial planning with the potential for some unexpected tax bills—definitely work with an expert on this one.

Is a Mega Backdoor Roth Possible ?

There are two prerequisites — if you’re unsure about either, double-check with HR or contact your Arconic-plan administrator.

Your 401(k) plan must allow for after-tax contributions. Not all 401(k) plans let you make after-tax contributions. Quick vocab lesson: after-tax is an entirely different contribution category from pre-tax and post-tax. (We’ve mentioned before how after-tax and post-tax used to be conflated.)
Your 401(k) plan must also allow for in-service withdrawals or in-plan Roth conversions. In-service withdrawals (also called in-service distributions) enable you to take money out of your 401(k) while you’re still employed with Arconic and roll it into a Roth IRA. In-plan conversions let you move your after-tax contribution into Roth dollars within the 401(k).

Featured Video

Articles you may find interesting:

Mega Backdoor Roth IRA Pros

Due to the dollar amounts, this strategy can really move the needle in your overall retirement savings and tax-free Roth asset bucket. Even if Arconic only permits this for a few years, it can still be worthwhile, assuming it makes sense in the context of the rest of your financial situation
If you can keep the entire mega backdoor Roth strategy in-plan, it can be fairly easy to execute for the individual.

Mega Backdoor Roth IRA Cons

Most individuals don’t have the flexibility to maximize the benefits of this strategy, especially on an after-tax basis.
Even when individuals have the means to use this strategy, it might not work at the plan level. Essentially, your Arconic-sponsored 401(k) plan must pass various testing requirements. This includes participation from ‘highly compensated employees’ or HCEs relative to ‘non-highly compensated employees’ or NHCEs. If only the HCEs are making after-tax contributions (as stands to reason), the plan may be forced to return a portion of the contributions to HCE participants if it fails the test.

How a Mega Backdoor Roth Works

The real limit on a contribution plan such as a 401(k) is actually pretty high: this year, it’s $61,000 (or $67,500 for people 50 and older). That max amount includes the $20,500 (or $27,000) employee elective deferral amount we’re most familiar with, as well as any matching contributions from Arconic, profit-sharing, and your after-tax contributions.

When you use the mega backdoor strategy, you take all the money from the after-tax contribution to your 401(k) and quickly transfer it into either a Roth IRA or to Roth dollars within your 401(k) before it can accrue investment earnings. There are also some instances where a company’s highest earners wouldn’t be able to max out their after-tax contributions due to IRS nondiscrimination tests . If available once it’s in a Roth-style account, the money will grow tax- free instead of tax- deferred , which means you won’t end up owing taxes on those earnings, and neither will your beneficiaries. Pretty nifty.

Speed is key, which is why in-service withdrawals or in-plan conversions is one of the requirements. You don’t want to have to wait until you leave Arconic to move that chunk of money.

NOTE: If you leave it as an after-tax contribution in your 401(k), it’s going to be accruing taxable earnings the whole time.

Doing the process manually is complicated, and we are here to assist.

Say you miss an in-service withdrawal or in-plan conversion and you’ve accrued some earnings. Not the end of the world. The IRS confirms you can shift the contribution portion into a Roth IRA and the gains portion into a traditional IRA, which takes some work, but you’ll preserve your contribution’s beneficial tax status.

Calculate Your After-Tax Contribution Amount

You’ll notice that we keep saying “up to $40,500” in additional contributions—that’s because everyone’s after-tax amount could be different. If you’re trying to make up the difference between the $20,500/$27,000 standard employee contribution amount and the $61,000/$67,500 max limit, you have to account for any matching by Arconic and profit-sharing along the way.

Let’s walk through a couple of simple scenarios.

Henry, 57

Max limit, based on age: $67,500

Salary: $100,000

Profit-sharing: 25 percent of salary

At 56, Henry has higher limits. If he maxes out his $27,000 employee contribution and gets $25,000 from his employer, Henry has room for $15,500 in after-tax contributions.

Nancy, 44

Max limit, based on age: $61,000

Salary: $100,000

Employee matching: Up to 3 percent of salary

If Nancy maxes out the $20,500 employee contribution, and her company matches $3,000, that means Nancy has room for $37,500 in after-tax contributions.

Jason (60 years old)

Max limit, based on age: $67,500

Contributes the maximum annual amount to both his 401(k) ($27,000 in 2022) and his IRA ($7,000 in 2022). He is looking to save even more by using a mega backdoor Roth IRA contribution, but he wants to know the maximum amount of after-tax contributions he can put into his 401(k) plan. If his total annual employer matching contributions are $10,000 in 2022, Jason can make after-tax contributions of up to $30,500 this year. Assuming his 401(k) plan has the appropriate provisions, John would transfer his after-tax contributions to his Roth 401(k) or Roth IRA, allowing him to place an additional $30,500 in a Roth account receiving tax-free growth.

One caveat: Some 401(k) plans do limit the amount you can contribute after-tax, so even if you have room to contribute more, you might not be able to. There are also some instances where a company’s highest earners wouldn’t be able to max out their after-tax contributions due to IRS nondiscrimination tests , which are designed to ensure those earning the most aren’t saving at a higher rate than everyone else in their organization.

And it bears repeating after-tax contributions aren’t deductible, and if left in the 401(k) plan instead of being shifted into a Roth-style account, the earnings could be taxed when withdrawn.

When you should consider a mega backdoor Roth

Mega backdoor Roths are an interesting option for high earners at Arconic looking for additional ways to save for retirement or for their heirs. It’s worth exploring with your financial planner if:

You’ve maxed out your personal 401(k) contributions. That comes first. When you’ve maxed out your contributions and still have more to save, you can consider going for a mega backdoor strategy.
You have additional funds you want to save for retirement. Mega backdoor Roths are a great way to store away cash every year. Still, there are many other financial strategies to consider, and things like time horizon and liquidity are important considerations.

What retirement benefits and options are available to employees of Arconic Corporation under the Arconic Corp. Pension Plan A, and how do these benefits change based on factors such as age, service length, and retirement category? Employees of Arconic Corporation should understand their eligibility requirements for normal retirement, early retirement, and disability benefits as outlined in the company's pension plan documentation.

The Arconic Corp. Pension Plan A provides retirement benefits based on a formula that considers average earnings and service length, with normal retirement eligibility at age 65 and at least five years of service. Early retirement is available at age 55 with 10 years of service, with benefits reduced based on actuarial assumptions. Disability benefits are available after 10 years of service, and preretirement death benefits offer 50% of accrued benefits to surviving spouses(Arconic Corporation_ Ja…).

How does the frozen state of benefits and service accruals impact current and future retirees at Arconic Corporation? Employees should evaluate how the freeze, effective April 1, 2018, affects their retirement planning and what measures they can take based on their individual circumstances to optimize their retirement benefits.

The frozen state of benefits and service accruals, effective April 1, 2018, means no new service credits or compensation increases are factored into pension calculations for current employees. This freeze affects retirement planning as employees must now rely on frozen benefits and other savings plans to meet retirement needs. It’s important for employees to reassess their financial goals and consider additional investments to optimize retirement benefits(Arconic Corporation_ Ja…).

In what ways can Arconic Corporation employees ensure they meet the requirements for spousal benefits outlined in the pension plan, especially regarding preretirement and postretirement scenarios? Understanding the specifics of eligibility and benefits, such as the surviving spouse benefit calculations, is crucial for employees planning for retirement.

To ensure eligibility for spousal benefits, employees need to meet certain requirements. Preretirement surviving spouse benefits require at least five years of service, and postretirement spousal benefits reduce the participant’s monthly benefit by 5%, with 50% of the reduced amount paid to the spouse if the participant dies first. Employees should understand these provisions to plan for their family’s financial security in retirement(Arconic Corporation_ Ja…).

What are the implications of the actuarial assumptions used by Arconic Corporation in valuing its pension obligations, and how do these assumptions affect the funding of the retirement plan? Arconic Corporation employees should examine how changes in interest rates and mortality tables influence the company's ability to meet its pension obligations.

Actuarial assumptions used in Arconic Corp.’s pension valuations, such as interest rates and mortality tables, directly impact the funding of retirement plans. Changes in these assumptions can affect the pension plan’s obligations and the amount of required contributions, making it important for employees to understand how these factors influence the stability and sufficiency of their retirement benefits(Arconic Corporation_ Ja…).

Can you explain the process by which Arconic Corporation employees can appeal decisions related to their pension benefits, and what support does the company provide during this process? Understanding the proper channels for appeals and the types of documentation required can be vital for employees facing issues with their pension benefits.

Employees can appeal pension benefit decisions through Arconic Corporation’s formal process, which includes submitting an appeal with supporting documentation. The company provides guidelines on what documentation is required, and employees should follow these closely to ensure their case is reviewed thoroughly. The support provided can include detailed responses to clarify benefit calculations and decisions(Arconic Corporation_ Ja…).

What resources are available to Arconic Corporation employees to help them make informed decisions about their retirement benefits, and how can they access these resources efficiently? Employees should know where to find comprehensive materials and support services concerning their retirement plans.

Arconic Corporation offers various resources to assist employees in making informed decisions about their retirement benefits. Employees can access comprehensive plan documents, financial planning tools, and counseling services through the company’s HR department and retirement plan administrators to ensure they fully understand their options(Arconic Corporation_ Ja…).

How does the Arconic Corporation define "average earnings" for calculating retirement benefits, and what methodologies are in place to ensure accuracy in these calculations? Understanding the basis for average earnings will allow employees to better project their pension benefits and prepare for retirement.

Average earnings, used in calculating retirement benefits, are defined as the average of the five highest consecutive calendar years of compensation within the last ten years for most participants. For certain participants, different rules apply based on service and plan conditions. Employees can review their earnings history to ensure accurate calculations and projections for retirement planning(Arconic Corporation_ Ja…).

What criteria does Arconic Corporation use to determine eligibility for deferred vested benefits, and how can employees maximize their advantages in this area? Employees need to be aware of the vesting schedule and how to plan for potential career transitions while maintaining their benefits.

Eligibility for deferred vested benefits in Arconic Corporation’s plan requires five years of service, and benefits can commence as early as age 55, with reductions based on actuarial calculations. Employees should plan career transitions carefully to maximize their vested benefits, especially when considering leaving the company before retirement(Arconic Corporation_ Ja…).

How can Arconic Corporation employees prepare for the potential tax implications of their pension benefits upon retirement, especially in light of IRS regulations for 2024? Being informed about tax strategies related to retirement income can significantly enhance retirees' financial wellbeing.

Employees preparing for retirement should understand the tax implications of pension benefits, particularly in light of IRS regulations for 2024. Strategies such as tax deferral and proper timing of distributions can help minimize the tax burden on retirement income, significantly enhancing financial outcomes(Arconic Corporation_ Ja…).

What contact methods does Arconic Corporation provide for employees wishing to learn more about their pension plan details, and how can employees best utilize these methods to get their queries resolved? Understanding the effective ways to communicate with the company for assistance is key for employees navigating their retirement benefits.

Arconic Corporation provides multiple contact methods for pension-related inquiries, including direct access to HR representatives and pension plan administrators. Employees are encouraged to utilize these resources effectively by preparing questions in advance and keeping detailed records of their communications for follow-up and clarity(Arconic Corporation_ Ja…).

With the current political climate we are in it is important to keep up with current news and remain knowledgeable about your benefits.

Arconic has announced a major restructuring plan that includes significant layoffs across its North American facilities. The restructuring is aimed at streamlining operations and reducing costs amid ongoing economic uncertainties. Additionally, Arconic is revising its pension and 401(k) benefits in response to shifting market conditions and regulatory changes.