Do you think it's fair to restrict higher earning employees contributions to a 401k program based on the lower earning employees contributions.
The IRS has a rule stating that the average contribution of "highly compensated employees" cannot be more than 2% higher than the non "highly compensated employees". Highly compensated being defined for 2005 as someone who made above $95K in 2004.
Everyone is limited to a maximum contribution of $11,000, but highly compensated people here are also limited to 9% of their pay. If you make 100K your're considered highly compensated so you can only contribute $9000 to your 401k plan and not the $11,000 that other people can contribute.
What's fair about this?
Nothing is fair about this, especially since I'm not making $100k per year!
People in that income bracket should have enough sense to set up a simple living trust, which is tax exempt until you withdraw funds for your personal use.
It's just another way the politicians can appear to be "punishing the rich" to appeal to the rest of us.
John Wilken
2002 Cavalier
2.2 Vin code 4
Auto
well i believe u can contribute as much as you like no matter what.
HOWEVER, your employer will only match what you put IN up to those figures u gave.
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Nathaniel O Flaherty wrote: well i believe u can contribute as much as you like no matter what.
HOWEVER, your employer will only match what you put IN up to those figures u gave.
No, actually it's just as I stated. Highly compensated employees can only contribute 9% of their wages which are matched at $0.25 on the dollar on the first 7%. Non highly compensated employees can contribute up to 50% of which the first 7% is matched $0.25 on the dollar.
Company Plan Literature wrote:If you elect to contribute, you must contribute savings of from 1% to 50% of your pay to the plan . . . unless you are a highly compensated employee.
Highly compensated employees may not contribute more than 9%. Moreover, in certain cases, IRS rules may limit the contributions of highly compensated employees to less than 9% of pay. In some cases, the plan may be required to refund savings contributions to highly compensated employees to satisfy the lower limit.
Company Plan Literature wrote:Your contributions are also subject to an annual dollar limit. The limit has been increased to $11,000 beginning with the year 2002, and will be increased in $1,000 increments through 2006. Thereafter, it may continue to be indexed.
John Wilken wrote:People in that income bracket should have enough sense to set up a simple living trust, which is tax exempt until you withdraw funds for your personal use.
While it's true there are many other options. This thread is about the 401k contribution limitation.
My point is that someone who makes 94K can contribute the up to the 11,000 limit and someone who makes 95k could only contribute $8550.
k cool thanx for clarifying.
honestly though, i dont see a problem with it.
if u want to save more than the limit allows, do like the last quote u put says.
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