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Posted by joetaxpayer on December 23, 2007, 1:16 pm
We know the employee deduction limit for the 401(k) is $15,500 for 2007
and 2008 (no increase next year), and if one turns 50 during the year,
they have a $5000 catch-up addition. But I rarely see a percent limit
mentioned, and googling hasn't helped, not has a search at IRS.gov.
I ask because while checking my Flexible Spending Account balance to
submit the final receipts, I saw my benefit site had this note:
"New: You can contribute up to 75% of your pay to the 401(k) plan, up to
the annual IRS dollar limit."
For what it's worth, the percent limit was 30% for this plan in 2007,
and 2006. I'm curious if this is related to the "highly compensated"
imbalance rules, where a 401(k) can have issues if they don't pass a
complex set of rules which compare the deferrals of the higher
compensated to the average, er, Joe employee, or if the IRS has a
maximum percentage allowed, and I just can't find it.
I know someone will ask why in the world would one want to withhold such
a high percentage?
A) One spouse retiring, so total gross still high enough to justify the
pretax savings. Work 3 months, max out the 401(k) and call it quits.
B) Changing jobs, new employer may have a waiting period, same motive to
max out early in the year.
C) Just to front load the savings (and use liquid cash to get by those
few months) and save post tax the rest of the year.
D) Fear of layoff in second half of year.
etc.....
JOE
www.blog.joetaxpayer.com
(I would like to wish both the regulars, and occasional visitors here, a
happy healthy holiday week, and safe New Year. I am honored to be part
of this newsgroup, both for the good work that it does and how while
there's frequently some disagreement, there's always respect for each
other and for our guests. I feel I am a better person for knowing you
all and hope we make those who visit feel the same of us. - JOE)
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Posted by Elizabeth Richardson on December 23, 2007, 6:19 pm
>But I rarely see a percent limit
> mentioned, and googling hasn't helped, not has a search at IRS.gov.
>
The last 2 places I worked, the employee 401k contribution was limited to a
percentage of income - I've never been able to contribute to the IRS dollar
max, whether I could afford to do so or not. However, my husband's 457 had
no such limit, and, in fact, he was allowed to defer as much as 100% of
income, up to the dollar limit, of course. Although I haven't researched it
lately, I seem to recall that the IRS has no percentage limitation, just the
dollar limit.
> JOE
> www.blog.joetaxpayer.com
> (I would like to wish both the regulars, and occasional visitors here, a
> happy healthy holiday week, and safe New Year. I am honored to be part
> of this newsgroup, both for the good work that it does and how while
> there's frequently some disagreement, there's always respect for each
> other and for our guests. I feel I am a better person for knowing you
> all and hope we make those who visit feel the same of us. - JOE)
The above comment typifies your attitude here, Joe, and that of so many
others as you suggest. I, too, appreciate it. It feels as if the generous
spirit of this season lasts through the year with the regulars here. Thank
you to all of you for that generous spirit, and may next year be a
prosperous and happy one for all of you.
Elizabeth Richardson
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Posted by Default User on December 23, 2007, 10:27 pm
Elizabeth Richardson wrote:
>
>
> > But I rarely see a percent limit
> > mentioned, and googling hasn't helped, not has a search at IRS.gov.
> >
>
> The last 2 places I worked, the employee 401k contribution was
> limited to a percentage of income - I've never been able to
> contribute to the IRS dollar max, whether I could afford to do so or
> not.
I believe, although I couldn't swear, that my company limits regular
contributions to 20% of salary. Catch-up contributions can be up to
50%, but of course that's only $5000 overall.
Brian
--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)
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Posted by on December 23, 2007, 7:20 pm
> We know the employee deduction limit for the 401(k) is $15,500 for
> 2007 and 2008 (no increase next year), and if one turns 50 during the
> year, they have a $5000 catch-up addition. But I rarely see a percent
> limit mentioned, and googling hasn't helped, not has a search at
> IRS.gov.
There isn't. As long as it's less than or equal to
your income at the employer providing the plan. If
you've got the cash available to live off of during
the time it takes to max out the plan, you can set it
to 100% if the employer's plan permits such (as mine
currently does).
> (I would like to wish both the regulars, and occasional visitors
> here, a happy healthy holiday week, and safe New Year. I am honored
> to be part of this newsgroup, both for the good work that it does
> and how while there's frequently some disagreement, there's always
> respect for each other and for our guests. I feel I am a better
> person for knowing you all and hope we make those who visit feel the
> same of us. - JOE)
Nicely said, Joe. Thank you so much - you and all the
others - and especially our kind and patient moderators.
My very best wishes to you all for the holidays and the
coming year.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
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