By Jeremy T. Rodriguez, JD
IRA Analyst


Planning Question – for retirement plans that permit Non Roth After Tax Contributions, could the company use Qualified Matching Contributions (QMACs) for the NHCEs to satisfy the ADP & ACP testing allowing the HCEs to max out their 415(c) ceiling above their own deferrals and company match contribution?

Or, is there a better way for the HCEs to max out up to the 415(c) ceiling?




Qualified Matching Contributions, or “QMACs,” are used to help plans pass the Actual Contributions Percentage Test (ACP). Since after-tax contributions are included in the ACP Test, QMACs can be used to help plans pass the ACP Test that fail because of after-tax contributions (i.e., non-Roth) made by highly compensated employees (called “HCEs”). However, annual non-discrimination testing is complicated and involves several different tests. One of those is the 415 test, which you alluded to above. Whether QMACs that are used to pass the ACP Test can also help an individual participant reach the 415 maximum limit will depend on the underlying facts. Finally, keep in mind that in order to be a QMAC, the contribution must meet certain standards set forth in the tax code and should be addressed in the plan document. When it comes to non-discrimination testing, it is best to work with the custodian or a knowledgeable professional.


Ed, isn’t it true that in order to convert an IRA to a Roth, that ALL of your IRA accounts MUST be converted?  Thanks in advance for your help!




That is not true. You can convert one IRA or even a portion of an IRA to a Roth IRA. However, if you do own multiple IRAs, they will all be considered when applying the pro-rata rule. The pro-rata rule is used to determine the taxable and non-taxable portion of a conversion when the individual has both deductible and non-deductible contributions in an IRA.