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Started By
Message
401(k) Plan Fails Nondiscrimination Testing
Posted on 4/4/19 at 10:31 pm
Posted on 4/4/19 at 10:31 pm
Subject applies to my wife's company.
In 2017 and 2018, she received a large refund back from her 401k contribution (she maxes out the maximum allowed amount by the IRS every year).
In those same years, we have both maxed out our Roth IRA contributions.
We also have a brokerage account that we don't touch and a large savings account that we constantly throw money into every paycheck. Her employer also has her enrolled in their deferred compensation program. Currently, we have over 2 years of an emergency fund saved up, cash on hand and don't owe anyone except our mortgage company.
I recommended that she pull back on the amount she contributes per paycheck (14 % right now), since she's going to get it back the following year, however I don't have a great recommendation on what her next steps should be.
Given that it is not likely that her company will pass any future discrimination testing (not likely due to the industry she is in), what are some options that we should look at?
In 2017 and 2018, she received a large refund back from her 401k contribution (she maxes out the maximum allowed amount by the IRS every year).
In those same years, we have both maxed out our Roth IRA contributions.
We also have a brokerage account that we don't touch and a large savings account that we constantly throw money into every paycheck. Her employer also has her enrolled in their deferred compensation program. Currently, we have over 2 years of an emergency fund saved up, cash on hand and don't owe anyone except our mortgage company.
I recommended that she pull back on the amount she contributes per paycheck (14 % right now), since she's going to get it back the following year, however I don't have a great recommendation on what her next steps should be.
Given that it is not likely that her company will pass any future discrimination testing (not likely due to the industry she is in), what are some options that we should look at?
This post was edited on 4/4/19 at 10:40 pm
6
Posted on 4/5/19 at 6:42 am to Will Cover
I do the same thing. Our cutoff is around $14,400. If I wasn't a budgeter/planner, I'd max out, get the refund check, and put it into an IRA but that's not the case. If you can use/invest that money now instead of having to wait for it every March, I say go ahead and make the adjustment. It probably all evens out in the wash. It sounds like you guys are good with your money, so it's really up to you.
Posted on 4/5/19 at 11:48 pm to Will Cover
quote:
she maxes out the maximum allowed amount by the IRS every year)
quote:
14 % right now
Subtle "my wife makes ~$130,000" brag
Posted on 4/8/19 at 7:23 pm to Will Cover
She needs to talk to her firm about a safe harbor 401k.
Posted on 4/9/19 at 5:24 am to 1609tiger
Yes, I agree. However, the company has been in business for many years and won’t comsider making a 401k change.
Posted on 4/9/19 at 7:12 am to Will Cover
I don't really see any point to this thread other than a not subtle brag...
Posted on 4/9/19 at 9:26 am to 1609tiger
quote:
she needs to talk to her firm about a safe harbor 401k.
It's just probably not going to happen. I have been trying for a few years at my company. We just have waaay too many people making $100,000 + .
Posted on 4/10/19 at 6:34 am to MusclesofBrussels
This isn’t the OT.
If I wanted to brag, I would have included more identifiable information in my original post.
My post isn’t about that. I don’t seek or need attention of others.
If I wanted to brag, I would have included more identifiable information in my original post.
My post isn’t about that. I don’t seek or need attention of others.
Posted on 4/11/19 at 3:16 pm to Will Cover
I second what 1609 said. Safe Harbor would be a seed to plant.
Posted on 4/11/19 at 3:21 pm to 1609tiger
quote:Doesn't make sense for all companies though.
She needs to talk to her firm about a safe harbor 401k.
Posted on 4/11/19 at 3:27 pm to Will Cover
I’m guessing it’s kicked back because not enough employees on the bottom end of the scale are not making contributions. That limits how much highly compensated employees can contribute. Maybe the company should address that problem. Many companies automatically sign you up to at least take advantage of the match. The employee can opt out but very few actually will.
Posted on 4/11/19 at 4:06 pm to Will Cover
How many employees?
Posted on 4/11/19 at 10:47 pm to agdoctor
quote:
I’m guessing it’s kicked back because not enough employees on the bottom end of the scale are not making contributions. That limits how much highly compensated employees can contribute.
100 % spot on.
Posted on 4/11/19 at 10:48 pm to VABuckeye
quote:
How many employees?
Fluctuates, but last year they printed nearly 6000 W2s.
Posted on 4/12/19 at 8:04 am to Will Cover
quote:
employer also has her enrolled in their deferred compensation program.
I just noticed this. Where does she work where she has a 401k and a deferred comp? Is this something to offset the difference she can't contribute to her 401k?
I'm probably totally wrong, but you usually don't see these at the same place. Usually it's a mix of deferred comp + pension, 401a, or 403b.
Posted on 4/12/19 at 6:10 pm to TheWiz
quote:
Where does she work where she has a 401k and a deferred comp?
Construction, fabrication and maintenance industry.
quote:
Is this something to offset the difference she can't contribute to her 401k?
No, not at all. Her employer is incredibly generous.
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