The Mega Backdoor Roth is a version of the 401 (k) plan of the Backdoor Roth IRA. It only works if your 401 (k) plan allows after-tax contributions and in-service distributions of after-tax funds. That means that the Roth backdoor option and the Mega Roth backdoor option could be extinguished if the Senate adopts the BBB bill. In addition, this bill would increase the annual minimum required distribution (RMD) for high-income taxpayers with large retirement account balances for tax years beginning after December.
So, on a very real level, the Backdoor Roth IRA is in danger of being wiped out. Right now, it may look like you're in limbo. In general, increased RMD rules would apply if the added value of a high-income taxpayer's qualified retirement plans including traditional IRAs, Roth IRAs, annuity contracts, 457 (b) deferred compensation plans, and defined contribution accounts exceeds specified amounts. The way I read the proposal, it allowed for 10 years (up to 203) to complete its IRA conversions to Roth, subject to the 400,000 limits, etc.
You seem to forget that, under the CURRENT rules, you can make a contribution from Roth Ira out the back door to gain a tax advantage. Meanwhile, those who performed backdoor Roth and mega backdoor Roth before the effective date will not be affected. If this current version is approved, there will be no more backdoor Roth or 401k to Roth conversions after tax. Allowed contributions to regular 401 (k) accounts are much higher than maximum amounts for Roth IRAs. A backdoor Roth 401 (k) conversion is the transfer of pre-tax and post-tax contributions in a regular 401 (k) account to an employer-designated Roth 401 (k) account.
Although there is a precedent for Congress to enact a tax law in the middle of the year and make it retroactive, that seems unlikely to happen with the Backdoor Roth IRA. Contributing to a Roth 401k instead of a traditional 401k before tax is usually not a good idea for people with high incomes because you have to give up tax savings in advance while you don't give up anything with the mega Roth backdoor. There would be no taxes on post-tax conversion to Roth, although, if Pam had other pre-tax IRAs at the time of conversion, the amount converted to Roth could be capped based on a prorated conversion requirement. And finally, Roth IRAs are great estate planning tools that don't come with the minimum distributions required during your lifetime.
