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401K Deferral Question

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JimW58
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401K Deferral Question  Reply with quote  

Hi All,

My wife's employer caps her 401K deferrals at 15% of her salary. She gives the 15% max but it isn’t enough to reach the $18,000 max for annual deferrals. She is over 50 but also not allowed to make “catch up contributions” due to the fact that she hasn’t reached the $18,000 limit. She wants to put more money into her 401K but cannot do so due to these restrictions. It seems these restrictions are extremely unfair to those employees who cannot max out the $18,000 deferral limit with a strict 15% cap on deferrals. Are these restrictions allowed by law? Shouldn’t she be able to contribute more? It seems completely unfair to restrict her deferrals in this manner.
Post Thu Nov 09, 2017 5:15 pm
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oldguy
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quote:
Are these restrictions allowed by law? Shouldn’t she be able to contribute more? It seems completely unfair to restrict her deferrals in this manner.


As I recall (I started my 401k in about 1982) companies were required to submit a Plan to the govt' that described how they would comply with the gov't Law. Companies had to stay under/within the 401k Law limits - but they could further restrict the guidelines.

That was before there were "matches", "catch ups", etc - so not much to change. Many companies added a high % limit (in addition to the gov't $ max such as $18,000). The idea was that the company wanted employees avoid over-investing, didn't want employees to get themselves into trouble by over-extending themselves and then owing penalties. Those problems didn't happen, in fact the opposite did, employees didn't invest much. In the 1980s, less than 35% participated - and very few contributed the max.

But I don't know the answer to your question - ie, I know that the % limit existed years ago - but don't know if those rule rules were ever removed.
Post Thu Nov 09, 2017 9:27 pm
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boatswain2PA
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1) Life isn't fair. Whoever told you it is lied to you.

2) Your wife's company is VERY generous to PAY her 15% match.

3) I believe that if the company matches up to 15%, it doesn't preclude her from contributing more than 15% (up to the $18K limit).

4) Your wife's best bet may be to contribute her (matched) 15%, and then put anything additional into a ROTH versus her 401K.
Post Sat Dec 16, 2017 6:23 am
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JimW58
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quote:
Originally posted by boatswain2PA
1) Life isn't fair. Whoever told you it is lied to you.

2) Your wife's company is VERY generous to PAY her 15% match.

3) I believe that if the company matches up to 15%, it doesn't preclude her from contributing more than 15% (up to the $18K limit).

4) Your wife's best bet may be to contribute her (matched) 15%, and then put anything additional into a ROTH versus her 401K.


Thanks for the info that "life isn't fair", I wasn't aware of that. As for the rest of your reply, good reading comprehension can take you far in life, bad reading comprehension, not so much.
Post Mon Dec 18, 2017 1:17 pm
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JimW58
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To the board mods/admin. This thread was over two pages long at one point with some very good info posted by the members. Now there are only 3 posts in it with a lot of it missing. Any idea what happened to the rest of the thread?
Post Mon Dec 18, 2017 1:24 pm
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boatswain2PA
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quote:
Originally posted by JimW58
good reading comprehension can take you far in life, bad reading comprehension, not so much.


Explains why you're asking for financial advice on this web-site, huh!
Post Sun Dec 24, 2017 5:41 pm
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JimW58
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quote:
Originally posted by boatswain2PA
quote:
Originally posted by JimW58
good reading comprehension can take you far in life, bad reading comprehension, not so much.


Explains why you're asking for financial advice on this web-site, huh!


Wrong again! Laughing
Post Tue Dec 26, 2017 1:15 pm
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