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401(k) discrimination testing
Posted on 3/15/15 at 9:35 pm
Posted on 3/15/15 at 9:35 pm
Received word by email on Friday that my company did not pass testing. The email did not reveal how much money I would be getting back.
Fast forward to Saturday and I received a check in the mail for just under $10K after taxes were taken out.
Given the industry that I am in, it is likely that my company will not pass discrimination testing again for this year. Less than 20 % of our workforce participates in our 401(k) program and those that do are in the top earning tier of our company.
What's done is done, can't change anything for 2014. My question is, would I be better served starting my own seperate ROTH IRA and reduce my contribution to my company's 401(k) program?
Currently, I am contributing 15 % per pay period.
Fast forward to Saturday and I received a check in the mail for just under $10K after taxes were taken out.
Given the industry that I am in, it is likely that my company will not pass discrimination testing again for this year. Less than 20 % of our workforce participates in our 401(k) program and those that do are in the top earning tier of our company.
What's done is done, can't change anything for 2014. My question is, would I be better served starting my own seperate ROTH IRA and reduce my contribution to my company's 401(k) program?
Currently, I am contributing 15 % per pay period.
This post was edited on 3/15/15 at 9:36 pm
5
Posted on 3/15/15 at 11:08 pm to Will Cover
Only contribute what the company matches. Put the rest in a Roth IRA.
Posted on 3/16/15 at 6:55 am to Will Cover
Is the company unwilling to go to a safe harbor 401k so they can eliminate the discrimination test?
Posted on 3/16/15 at 8:15 am to TigerstuckinMS
quote:
Is the company unwilling to go to a safe harbor 401k so they can eliminate the discrimination test?
Appears to be that way. This is the second year in a row that my company did not pass testing.
Posted on 3/16/15 at 8:56 am to Will Cover
What is the current match?
Posted on 3/16/15 at 9:54 am to Will Cover
I don't know how much you are contributing, but considering you got back 10K after taxes, and considering what the contribution limits are... my guess is your company failed testing by a wide margin.
I would definitely 401K to the match, then Roth, and see where that gets you. If you have other buckets like a HSA you can use, fill that up. Then go back to the 401K.
As someone who volunteers with personal finance classes, I'm saddened that so few of your employees are taking advantage. Do they just not have any extra money to invest, or are they just not knowledgeable?
I would definitely 401K to the match, then Roth, and see where that gets you. If you have other buckets like a HSA you can use, fill that up. Then go back to the 401K.
As someone who volunteers with personal finance classes, I'm saddened that so few of your employees are taking advantage. Do they just not have any extra money to invest, or are they just not knowledgeable?
Posted on 3/16/15 at 10:39 am to LSUFanHouston
quote:
Do they just not have any extra money to invest, or are they just not knowledgeable?
i think it is both. The company i work for had a company wide dinner meeting to explain the new 401k changes after switching investment companies.
The owner said that participation was lower then he wanted in the field, so he gave everyone in the field a 6% raise. Our company matches up to 6%, so he was basically telling them to start contributing, he would match the 6% they put in, and they would see no change in their take home pay.
Still not many wanted to contribute....
Posted on 3/16/15 at 10:44 am to tigeraddict
That's a sweet deal. Some people just don't trust the stock market or don't understand it.
Posted on 3/16/15 at 10:46 am to iAmBatman
quote:
That's a sweet deal. Some people just don't trust the stock market or don't understand it.
I don't understand how the average person expects to retire without the stock market.
Posted on 3/16/15 at 10:50 am to LSUtoOmaha
quote:
I don't understand how the average person expects to retire without the stock market.
Easy. They, unfortunately, dont understand either
Posted on 3/16/15 at 11:11 am to iAmBatman
quote:
Some people just don't trust the stock market or don't understand it.
That's undoubtedly part of it, but I think the larger issue is simply people not being able to tell themselves "no" today in order to secure themselves in the future. Can't pay for those boats and F-250s with 401(k) contributions.
Posted on 3/16/15 at 11:19 am to Brummy
6% is a solid match. Unfortunately plenty people I know in the oilfield are in their 40's and have never invested a dollar beyond the 401k plan minimum.
Posted on 3/16/15 at 11:19 am to Brummy
I just don't understand that with how easy it is today. It comes right out if your check and you never even see the cash.
And as far as people being afraid, my FIL is one of those people and plans on working until he dies on his feet. He has literally 0 saved for retirement. He always tells me that the market is rigged and its all a big scam
And as far as people being afraid, my FIL is one of those people and plans on working until he dies on his feet. He has literally 0 saved for retirement. He always tells me that the market is rigged and its all a big scam
Posted on 3/16/15 at 11:48 am to Will Cover
If we didn't do a safe harbor none of management would be able to invest
Posted on 3/16/15 at 12:04 pm to LSUFanHouston
Most people don't think of Ron White as a financial guru. However, he said it best "you can't fix stupid".
Posted on 3/16/15 at 12:18 pm to tigeraddict
quote:
Our company matches up to 6%, so he was basically telling them to start contributing, he would match the 6% they put in, and they would see no change in their take home pay.
Still not many wanted to contribute....
You work with some really dumb people. Why don't they want free money?
Posted on 3/16/15 at 12:34 pm to TIGERSby10
quote:
You work with some really dumb people. Why don't they want free money?
We have a simple IRA at my office. Owner contributes 3% and half of the people don't participate. I have tried to educate but people live paycheck to paycheck. Can't live without those big screen TV's and new cars. I guess they are counting on SS to live later in life
Posted on 3/16/15 at 2:03 pm to Maderan
quote:
What is the current match?
100 % of the first 4 % contributed.
This post was edited on 3/16/15 at 2:06 pm
Posted on 3/16/15 at 2:04 pm to LSUFanHouston
quote:
As someone who volunteers with personal finance classes, I'm saddened that so few of your employees are taking advantage. Do they just not have any extra money to invest, or are they just not knowledgeable?
Most of my company, i.e. field workers make a low hourly wage and these people represent the majority of our work force.
This post was edited on 3/16/15 at 7:06 pm
Posted on 3/16/15 at 7:05 pm to Will Cover
Bump.
Just received another check in the mail today for $2K and some change.
Called Fidelity and was told this was the "employer contribution" amount. The representative that I spoke to on the phone said he didn't know why our company decided to issue two separate checks.
Either way, I believe it is time for me to bump down my contribution amount and start a separate ROTH IRA.
Just received another check in the mail today for $2K and some change.
Called Fidelity and was told this was the "employer contribution" amount. The representative that I spoke to on the phone said he didn't know why our company decided to issue two separate checks.
Either way, I believe it is time for me to bump down my contribution amount and start a separate ROTH IRA.
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