Key Insights

• IRS limits leave executives underserved. For leaders earning well into six figures, standard 401(k) caps barely make a dent in long-term planning, making advanced strategies essential.

• Strategic plan design unlocks real value. Features like the Mega Backdoor Roth, in-service rollovers, and responsible company stock allocations transform a compliance tool into a wealth-building engine.

• Actionable strategies drive engagement. Offering a Mega Backdoor Roth option, enabling in-service withdrawals, and adding self-directed brokerage windows position the plan as a central part of an executive’s broader financial strategy.

The battle for top talent isn’t won on salary alone. In industries like tech, law, and finance, executives and partners regularly earn well into the six figures. Yet too often, 401(k) plans are designed with the average employee in mind, leaving high earners underserved.

On paper, the IRS contribution limits look generous. In 2024, employees can contribute up to $23,000—or $30,500 if they’re over 50. But for an executive earning $500,000, those limits barely register. Add in the fact, those high earners are phased out of Roth IRAs, and the result is a retirement plan that feels more symbolic than strategic.

This mismatch matters. Leaders with complex compensation packages that include bonuses, carried interest, or equity grants are deeply attuned to tax efficiency and wealth diversification. If their employer’s retirement plan doesn’t reflect those priorities, they’re more likely to disengage from it altogether.

The Case for the Mega Backdoor Roth

Among the most effective tools available is the Mega Backdoor Roth. The name may be clunky, but the strategy allows high earners to move significant after-tax contributions into Roth accounts, where future growth is entirely tax-free.

Unlike a traditional Roth IRA, which excludes those with high incomes, the Mega Backdoor Roth allows you to contribute up to an additional $46,000 annually. For executives managing large bonuses or stock-based compensation, this strategy offers not only tax diversification but also a sense of control over future liabilities.

Implementing this feature isn’t just about ticking a box. It requires deliberate plan design—after-tax contributions must be permitted, in-plan conversions or in-service rollovers must be enabled, and payroll systems need to be configured to handle multiple contribution types. It also demands thoughtful communication. Without clear guidance, employees may overlook or misunderstand a benefit that could significantly change their financial trajectory.

Owning Company Stock in Retirement Plans

Few benefits capture attention like company stock in a 401(k). Done well, it can create a strong sense of ownership, reward employees for their role in the company’s growth, and align long-term financial futures with business success. For many, it transforms retirement savings into a tangible stake in the enterprise they help build every day.

The challenge, of course, is balance. Too much concentration in one stock, especially of the same company providing your income, can increase risk. Public companies often solve this with thoughtful guardrails such as caps on exposure, diversification windows, and clear communication around trading restrictions. 

Private companies, while facing valuation and liquidity constraints, can unlock similar benefits through structured approaches like ESOPs, which formalize ownership and provide long-term value.

Complex Solutions Create More Problems Than They Solve

Every few years, bank-owned life insurance (BOLI) and company-owned life insurance (COLI) resurface as supposed solutions for executive benefits. They sound sophisticated, but the reality is less flattering. These products are costly, opaque, and often illiquid, with benefits that accrue primarily to the corporation rather than the employee. Worse, they create reputational risk in the wake of controversies around companies profiting from employee deaths.

If the goal is to provide meaningful executive benefits, there are better tools. A richer 401(k) match, profit-sharing, or a transparent non-qualified deferred compensation plan delivers clearer value without the baggage.

Meeting High Earners Where They Are

Perhaps the most overlooked part of retirement plan design is recognizing how high earners already manage their wealth. It was reported several months ago that Peter Thiel pledged over $1 billion of his Palantir stock as collateral for personal debts. Not everyone is Peter Thiel, but many high earners use securities-based lending to unlock liquidity without selling stock. Others defer income through non-qualified plans, or pair 401(k) savings with cash balance plans to maximize tax-deferred contributions.

Your retirement plan doesn’t need to replicate these strategies. But it should complement them. Offering a Mega Backdoor Roth option, enabling in-service withdrawals, or including a self-directed brokerage window makes the plan a meaningful part of an executive’s broader financial architecture.

Turning Complexity Into Clarity

Designing the right plan features is only half the job. The other half is communication. High earners don’t just want access to advanced strategies; they want to understand exactly how those strategies apply to their situation. HR leaders who provide scenario-based education—explaining, for example, how a partner might use the Mega Backdoor Roth to shelter part of a bonus—turn abstract plan features into real-world value.

This is also where governance matters. Documenting fiduciary decisions with ERISA counsel, setting clear rules for company stock, and establishing policies around plan loans or diversification aren’t just compliance boxes. They are signals to employees that the plan is carefully designed with their best interests in mind.

Retirement plans can be more than a compliance obligation. Well-designed plans for companies with higher earners are a strategic tool for talent retention and executive engagement. High earners expect sophistication, not one-size-fits-all solutions. By enabling the Mega Backdoor Roth, managing company stock exposure responsibly, steering clear of misaligned insurance products, and aligning benefits with the way wealthy employees manage their assets, HR leaders can design plans that every employee loves.

When retirement benefits feel thoughtful and relevant, they send a powerful message that your company understands not just the work its leaders do, but the financial lives they lead.