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re: Can someone explain the highly compensated employee 401k rule
Posted on 6/30/15 at 10:15 am to jmh5724
Posted on 6/30/15 at 10:15 am to jmh5724
quote:
For the last three years my pretax contributions have been capped at 12% by my employer. Because of this I fall short of the pre tax max every year now. What's the point of having a limit if I'm not even allowed to get to it and how is this legal?
As others have said, there are ways around this rule, however, that way around will generally cost your company money. If you are upset at anyone, be upset at your company for being cheap and not doing a safe harbor match.
Is the rule "fair"? Probably not, but it was put in place to ensure that all employees have access to a 401K plan. Like many government regs, it's solves the job by using a sledgehammer rather than a small hammer.
0
Posted on 6/30/15 at 12:58 pm to GenesChin
quote:
TAX SAVINGS on $15k contribution
1) ~15% Fed + ~5% State = approx $3000
2) ~33% Fed + ~5% State = approx $9300
Is there a math error here?
Doesn't the #2 earner only save 38% of 15k?
Posted on 7/1/15 at 5:59 am to Croacka
Get your company to change the plan rules and make people auto invest at say 3% or get HR to really sell the 401k plan during open enrollment. Our HR lady hammers the young kids and scares them into participating.
Posted on 7/1/15 at 6:49 am to Croacka
quote:
Is there a math error here?
Doesn't the #2 earner only save 38% of 15k?
You're right and I am editing it. Multiplied by the take home percentage not taxed percentage. Good catch, I don't mean to present anything misleading as misconstruing facts supports terrorism.
Posted on 7/1/15 at 6:51 am to Serraneaux
quote:
Get your company to change the plan rules and make people auto invest at say 3% or get HR to really sell the 401k plan during open enrollment. Our HR lady hammers the young kids and scares them into participating.
We get auto enrolled + HR person during orientation spends about 2 hours explaining how it is like getting a raise every year just to act like an adult by saving
Seriously, it is the most patronizing speech I have ever heard but it fricking works
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