<prompt> Human: So I had read about the Mega-Backdoor Roth last year and it sounded like I might be able to pull it off.This is when you contribute after-tax dollars to your 401k and then roll it over into a Roth IRA, and it gets around the normal 5500 cap on contributions.After doing some reading on how to pay for college for my 2 kids, a Roth seemed like the best way to do it. The only reason people advise against it is because you can normally only contribute 5500 into it and you dont want to be spending money in a tax-advantaged retirement account if you dont have to. Also, you can withdraw contributions from a Roth for Higher-Education expenses without paying any penalty. I could barely put 5500 normal dollars into my Roth for my normal retirement, anything extra was going toward a college fund, so it made sense to try and get the college fund money in there, too. Yes, I am already contributing 8 to my 401k and it gets matched by 4, and the company gives me 3 off the bat vested in 3 years, so 15 overall, I contribute 5500 to a personal Roth, and I contribute 6750 to an HSA account which I can use anything over 2k for investing. I wanted to use a Roth because unlike a 529, if my children dont use it for higher-education for whatever purpose I dont have to pay a penalty to use it. My state offers no tax break for contributions to 529 plan.My employers plan is old as dirt one of the things that favor it being able to do a Mega-Backdoor so I called and asked the provider last year and I explained everything to them. Did they allow after-tax contributions to the plan, and do they allow in-service rolloverswithdraws of those after-tax dollars? They put me on hold for about 15 minutes and came back and said that yeah, I should totally be able to do what I described rollover after-tax dollars from my 401k to my Roth. So I set it up to contribute after-tax dollars to the 401k plan, and it was going to be around 5k a year that I would be able to put in the Roth for college later on.I called my provider yesterday about an unrelated topic and while I had the guy on the phone I asked him to roll the after-tax dollars in my 401k into my Roth. He starts asking a ton of questions and I answer them all, he puts me on hold for about 15 minutes and comes back and says Sorry bro.Turns out they do allow in-service rollovers of money contributed to my 401k, but not ONLY after-tax dollars. It would have to be a mix of my pre and post tax contributions. Either they changed it between the 9 months or so that has gone by since I talked to them, or they just didnt have their facts straight that first time. I actually waited a day and called back and had another guy try to do it and he said the same thing, so I said fine Ill just take it as a withdraw, I already paid tax on it and will put it in my daughters actual 529 plan that I still have. Guy says, Sorry bro, turns out is the same way for normal withdraws as it is for rollovers, they cant take it specifically from one source. They can tell me exactly how much I have contributed in after-tax dollars, and my cost basis for that after-tax money, but not withdraw or rollover specifically from that bucket of money in the 401k.Ill just come right out and say that my employees service plan provider is Fidelity.Im not even mad at Fidelity, it really is a goofy thing to try and pull off and I hadnt even gotten to the point where I was going to have to explain all this to my accountant Dtl;dr If you are trying to do a Mega-Backdoor Roth then the first year try and rollover some after-tax contributions into the Roth early in the year to make sure that you can actually do it. I contributed about 3k of already taxed money into a 401k which is downright stupid and cost me about 600 or so I guess.  <response>: They do allow in-service rollovers of money ... but not ONLY after tax dollars.Dont fault your company for the regulation; thats an IRS regulation thats been in place since 1986. Before January 1, 1987, people could withdraw only after tax dollars from their account. The tax law changed and impacted after-tax contributions posted after December 31, 1986. When you put after tax dollars into your tax-deferred account, it has to be tracked separately; in its own bucket, if you will. The IRS says that when you draw from the after tax bucket, your withdrawal must be taken from contributions and earnings, in the same proportion that it exists within the plan. So if your after tax account grew and the balance is 80 your contributions and 20 earnings, then thats how the money has to come out.Again, this is an IRS regulation, not a Fidelity rule or a company rule. The plan may allow you to take from the after-tax source a source is defined as where the money came from, and includes contributions and earnings; the IRS says that there has to be taxable money involved.The good news is, you can give one set of instructions for the taxable money and a different set of instructions for the non-taxable money when it comes out. So you can say rollover the taxable money to a traditional IRA and rollover the Roth money to a Roth IRA.Source: I worked at a 401k record keeper and administrator for 10 years. 