HII Mega-Backdoor Roth: The $47,500 Window
HII Savings Plan participants can contribute up to $47,500 in after-tax dollars and convert to Roth. Here is how the math works for NNS engineers.
Most HII Newport News Shipbuilding employees know about the company match. Far fewer know that the HII Savings Plan allows after-tax contributions up to 75% of eligible compensation, opening a path to the single most powerful tax-free wealth-building tool available to W-2 earners: the mega-backdoor Roth.
What Is a Mega-Backdoor Roth?
A standard Roth IRA has income limits. In 2026, single filers earning above $150,000 in modified adjusted gross income cannot contribute directly. The mega-backdoor Roth sidesteps those limits entirely by using a different door: the after-tax contribution bucket inside an employer-sponsored 401(k) plan.
Here is how it works. The IRS sets three contribution buckets inside a 401(k):
- Pre-tax or Roth elective deferrals (your regular 401(k) contributions)
- Employer contributions (match, profit sharing)
- After-tax employee contributions (the mega-backdoor bucket)
The total of all three buckets cannot exceed the Section 415(c) annual additions limit, which is $72,000 in 2026. Your mega-backdoor Roth room is whatever space remains after your elective deferrals and employer match.
How Much Can an HII Engineer Actually Contribute?
The HII Savings Plan has multiple sub-plans with different match formulas. The match varies by population. Here is a summary of the key sub-plan match structures:
| Sub-Plan | Match Formula | Typical Match on $97K Salary |
|---|---|---|
| A (represented, hired pre-cutoff) | 5% of first 8% deferred | $4,850 |
| CC/CM | 3% of first 4% deferred | $2,910 |
| D | No match | $0 |
| GG | 2% of first 3% deferred | $1,940 |
| AMSEC | 45% up to $2,500/yr | $2,500 |
Let’s walk through the math for a Sub-Plan A engineer earning $97,000 per year.
Step 1: Elective deferral. The 2026 limit is $24,500. If you are under 50, that is your maximum pre-tax or Roth deferral.
Step 2: Employer match. Under Sub-Plan A, HII matches 5% on the first 8% you defer. On a $97,000 salary, that is 5% of $7,760 = $4,850.
Step 3: After-tax room. Subtract your deferral and match from the Section 415(c) ceiling:
$72,000 - $24,500 - $4,850 = $42,650
That is $42,650 in additional after-tax contributions you can make in 2026, on top of your regular 401(k) savings.
Step 4: Convert to Roth. The HII Savings Plan allows in-service withdrawals of after-tax contributions at age 59.5. At that point, you roll the after-tax balance into a Roth IRA. The contributions convert tax-free (you already paid tax on them). Only the earnings on those contributions are taxable at conversion.
What If You Max Everything Out?
Here is the full picture for a Sub-Plan A participant under age 50:
| Contribution Type | 2026 Amount |
|---|---|
| Pre-tax or Roth deferral | $24,500 |
| HII match (Sub-Plan A, $97K salary) | $4,850 |
| After-tax (mega-backdoor) | $42,650 |
| Total annual additions | $72,000 |
For someone age 50 or older, the standard catch-up adds $8,000, bringing the elective deferral to $32,500 and the Section 415(c) ceiling to $80,000.
For those ages 60 through 63, the SECURE 2.0 Act Section 109 super catch-up allows $11,250 instead of the standard $8,000, pushing the ceiling to $83,250.
Why This Is the Most Overlooked Tool at NNS
The math is stark. Over a 20-year career, an engineer who contributes $42,650 per year in after-tax dollars and converts to Roth accumulates roughly $853,000 in contributions alone.
Assuming a 7% annual return on those contributions, the total Roth balance after 20 years grows to approximately $1,748,000.
That entire balance, contributions and earnings, comes out tax-free in retirement if the Roth IRA has been open for at least five years and you are over 59.5.
Compare that to the same $42,650 invested in a taxable brokerage account at the same 7% return. At a 15% long-term capital gains rate, the after-tax terminal value would be roughly $1,600,000. The Roth advantage over 20 years: approximately $134,000 in tax savings.
The 59.5 Conversion Window
This is where many HII participants get confused. You cannot convert your after-tax contributions to a Roth IRA at any time while employed. The HII Savings Plan currently permits in-service withdrawals of after-tax balances at age 59.5. Before that age, the after-tax money sits in the plan and grows. Any earnings on those after-tax contributions are taxed as ordinary income at conversion.
The strategy is to convert as soon as you are eligible. The longer you wait after 59.5, the more earnings accumulate inside the after-tax bucket, and the larger your taxable conversion amount becomes.
Some 401(k) plans allow immediate in-plan Roth conversions of after-tax contributions (a true “mega-backdoor” with no age restriction). The HII plan’s 59.5 requirement is more restrictive but still valuable, especially for employees in their late 50s and 60s who are approaching or past that threshold.
What About Catch-Up Contributions?
If you are 50 or older, you get additional deferral room:
| Age | Deferral Limit | Catch-Up | Total Deferral | 415(c) Ceiling |
|---|---|---|---|---|
| Under 50 | $24,500 | $0 | $24,500 | $72,000 |
| 50-59 | $24,500 | $8,000 | $32,500 | $80,000 |
| 60-63 | $24,500 | $11,250 | $35,750 | $83,250 |
| 64+ | $24,500 | $8,000 | $32,500 | $80,000 |
Note: The SECURE 2.0 super catch-up for ages 60 to 63 takes effect in 2026 for participants whose prior-year FICA wages exceeded $150,000. Below that threshold, the standard $8,000 catch-up applies. For those above the threshold, catch-up contributions must go into the Roth bucket.
Three Common Mistakes
1. Confusing after-tax with Roth. After-tax contributions are not the same as Roth 401(k) contributions. Roth contributions count toward the $24,500 elective deferral limit. After-tax contributions are a separate bucket that fills the gap between your deferrals plus match and the $72,000 ceiling.
2. Not converting soon enough. Every month of earnings that accumulates in the after-tax bucket before conversion is taxable income at conversion. The optimal move is to convert at 59.5, not at retirement.
3. Ignoring the five-year rule. Converted Roth IRA funds have their own five-year clock. If you convert at 59.5, the earnings are accessible tax-free at 64.5. Plan accordingly.
What to Do Next
Review your HII Savings Plan enrollment. Check whether you are making after-tax contributions. If not, consider whether maximizing this bucket fits your cash flow. The Section 415(c) ceiling of $72,000 is a hard limit, but the after-tax room inside it is real, available, and underused.
For more on how pre-tax and Roth contributions compare, see our guide on Roth vs. Traditional IRA decisions. If you are evaluating the HII match across sub-plans, our breakdown of HII sub-plan match structures covers the differences. And for a broader look at how your 401(k) fits into your overall retirement picture, see what to do with your 401(k) when you leave a job.
Ferrante Capital LLC is a registered investment adviser. Information presented is for educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. All investing involves risk, including the possible loss of principal.
FC and its principals may hold positions in HII. This analysis is for educational purposes only and does not constitute a recommendation to buy, sell, or hold any security.
Forward-looking statements reflect Ferrante Capital’s current analysis and involve assumptions and estimates. Actual results may differ materially. Past performance is not indicative of future results.
Please consult a qualified financial professional before making investment decisions.
