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Posted on 4/6/14 at 10:03 am to foshizzle
quote:
My employer has annual revenues in the billions of dollars.
Interesting, I wonder how common this is.
Posted on 4/6/14 at 10:10 am to reb13
Most Americans suck at saving so I'd guess that it's more common than you would think.
Posted on 4/6/14 at 10:19 am to Smalls
quote:
What general line of work are you in, BTW?
ERP consulting and implementation. Think SAP, Oracle Financials, Peoplesoft, etc.
Posted on 4/6/14 at 10:19 am to reb13
quote:
Interesting, I wonder how common this is.
Only time it's ever happened to me.
Posted on 4/6/14 at 12:14 pm to foshizzle
It's somewhat uncommon for a larger and/or public company. You must not have a decent employer match if any at all.
Most make the contributions of one of the "Safe Harbor" contributions so that it eliminates the testing that tripped you up.
If you're courious google Safe Harbor plan design.
The DepArtment of Labor started doing the testing when business owners would put a plan in and not really tell the front line/ low wage employees about it. The owners and higher ups knew about the plan and had ongoing communication about it, but the lower wage/ non- owners were kept out. The testing is done to make sure this practice ended by tying contribution limits of highly compensated and owners to that of the lower wage employees.
With a small contribution to all eligible employees, or slightly larger contribution only to those that participate in the plan, these tests go away and you don't get your money refunded.
If it's a large/profitable company, I'd reach out to HR and let them know its an issue. They will fix it if enough people complain. Especially since its all their highly compensated / more important employees complaining.
Most make the contributions of one of the "Safe Harbor" contributions so that it eliminates the testing that tripped you up.
If you're courious google Safe Harbor plan design.
The DepArtment of Labor started doing the testing when business owners would put a plan in and not really tell the front line/ low wage employees about it. The owners and higher ups knew about the plan and had ongoing communication about it, but the lower wage/ non- owners were kept out. The testing is done to make sure this practice ended by tying contribution limits of highly compensated and owners to that of the lower wage employees.
With a small contribution to all eligible employees, or slightly larger contribution only to those that participate in the plan, these tests go away and you don't get your money refunded.
If it's a large/profitable company, I'd reach out to HR and let them know its an issue. They will fix it if enough people complain. Especially since its all their highly compensated / more important employees complaining.
This post was edited on 4/6/14 at 12:23 pm
Posted on 4/6/14 at 12:54 pm to tigers win2
quote:
The DepArtment of Labor started doing the testing when business owners would put a plan in and not really tell the front line/ low wage employees about it. The owners and higher ups knew about the plan and had ongoing communication about it, but the lower wage/ non- owners were kept out. The testing is done to make sure this practice ended by tying contribution limits of highly compensated and owners to that of the lower wage employees.
This answered my question (why this happens). 'Preciate the knowledge.
Posted on 4/6/14 at 1:14 pm to tigers win2
There are other parts of the overall benefit package that are pretty solid but the 401 match isn't one of them.
Posted on 4/6/14 at 3:32 pm to foshizzle
Are you married? You could put it in a spousal IRA.
Posted on 4/6/14 at 4:56 pm to reb13
quote:
I'm assuming this only happens in smaller companies?
Nope. I have a friend that works at a publicly traded company with > 15k employees. In 2012 they capped him at $8k annual contributions and he definitely is not a HCE, although in his company he must be considered a baller. My wife makes almost as much as him working 4-days a week at a different company and is allowed to max out her 403b + has a defined pension plan.
Posted on 4/6/14 at 5:15 pm to tirebiter
quote:
In 2012 they capped him at $8k annual contributions and he definitely is not a HCE
This may be a different issue where they can only defer a certain percentage of salary, say 20%. That was common at one point. Now most plans allow up to 80% of salary deferral. This is done also to allow Lower wage employees a better chance of hitting the government established contribution limitations.
If they limited your friend based on other employee contribution percentages he is a HCE or is family to the owner or is an owner. No other way they can limit him.
This post was edited on 4/6/14 at 5:20 pm
Posted on 4/6/14 at 5:39 pm to foshizzle
Take the 3K and invest in some weed stocks.
Posted on 4/6/14 at 5:43 pm to tigers win2
quote:
If they limited your friend based on other employee contribution percentages he is a HCE or is family to the owner or is an owner. No other way they can limit him.
In his firm he is considered HCE, in the general work force no way he would be considered that, especially with 20+ years experience. They have too many low paid FT employees.
Posted on 4/6/14 at 6:12 pm to tirebiter
quote:
In his firm he is considered HCE, in the general work force no way he would be considered that, especially with 20+ years
HCE is an IRS definition. It's the same for all companies and industries. It looks like your friend makes $115,000+. Maybe a little less a year or two ago.
Defenition below.
An important aspect of performing the ADP and ACP tests is to properly identify the HCEs. IRC Section 414(q) defines HCEs to generally include any employee who:
Was a 5% owner at any time during the year or prior year (a 5% owner is someone who owns more than 5% of the employer), or
For the prior year, was paid by the employer more than $115,000 (for 2012 and 2013; subject to cost-of-living adjustments in later years) and, if the employer elects, was in the top-paid (top 20%) group of employees.
Family aggregation rules may affect the treatment of stock owned by family members. The law treats a spouse, child, grandparent or parent of someone who is a 5% owner, as a 5% owner. Each of these individuals is an HCE for the plan year. It's important to identify the family ownership interests of all company stock and to forward that information to the persons performing the tests.
Posted on 4/6/14 at 6:31 pm to tigers win2
Maybe this:
Definitely not this:
quote:
if the employer elects, was in the top-paid (top 20%) group of employees.
Definitely not this:
quote:
For the prior year, was paid by the employer more than $115,000
Posted on 4/6/14 at 6:58 pm to tirebiter
$115K is the main number. The other element was an "and" scenario. Meaning 115k is the first point of criteria.
Someone who doesn't earn 115k is not an HCE unless the ownership piece comes into play even if they make more than everyone else in the company.
Someone who doesn't earn 115k is not an HCE unless the ownership piece comes into play even if they make more than everyone else in the company.
This post was edited on 4/6/14 at 10:09 pm
Posted on 4/6/14 at 9:00 pm to foshizzle
Tell your employer to convert to a safe harbor plan
Posted on 4/6/14 at 10:04 pm to LSURussian
quote:
Roth it?
He'd have to pay takes on it.
Posted on 4/7/14 at 4:35 pm to foshizzle
This is a reason why a lot of companies are switching to a match AND a defined contribution.
E.g we used to have a straight 6% match now it is a 4% match and a 2% employer contribution.
Also this allows them to say they have 100% participation among eligible associates.
E.g we used to have a straight 6% match now it is a 4% match and a 2% employer contribution.
Also this allows them to say they have 100% participation among eligible associates.
Posted on 4/7/14 at 10:12 pm to reb13
quote:
I'm assuming this only happens in smaller companies?
Hasn't happened to me yet, but I work for a Fortune 100 company
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