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rated:
I  planned to max my 401K for this year by taking the max and dividing by all my pay checks and contributing pre tax to that each month.
I discovered today, that at the end of last year, I accidentally had a checks worth of contributions apply towards this year. (essentially, pay dates were for Dec 23rd to Dec 1st,  but I didn't get paid till Jan 8th, so all of that checks contributions applied to this year.

That means I reached the max this week, with 3 checks left.

If I can't contribute to my 401K the rest of the year, I can't earn the company 6% match.

I have a question in to HR to see if I can over contribute, so I can get the match and then in January ask for reimbursement of the overage, of which I'll pay taxes accordingly, and should be good.  Not sure they will let me do this though.

Another thing my local HR rep found, is that they said they saw where it looks like I could contribute to the 401K AFTER tax, by speaking directly with our brokerage, and then that would allow me to still get the 6% company match.

I am about to call the brokerage (Schwab) and see if they can get this done, but I'm thinking that is essentially a "ROTH" contribution, and I vaguely recall there were some rules and issues of having pre and post tax contributions sitting in the same account in regards to how those are handled, and future ramifications if I tried to do certain things later.

Can anyone speak to clarify this, and offer a suggestion on what they are talking about and what would make the most sense?

From a total retirement contribution standpoint, I launched a request this morning to raise my wifes 401k contribution to cover the deficit I can't do, so I can get funds in that way, but unless I figure something out with mine, i'll lose the co 6% for 3 checks.

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rated:
Your company might offer a "true-up", in which case you don't have a problem as long as you remain employed there through the time the true-up gets paid. Ask your HR folks to check if you have one of those.

rated:
Did you ask HR if they do a true-up? Many companies will ensure you get the maximum possible match regardless of how your contributions were spread out during the year. That would alleviate this whole issue.

You're asking the right questions about after-tax contributions, but it is important to note that "after-tax" contributions are not Roth contributions. With a Roth, your investment gains are not taxed. With an after-tax contribution, those gains are taxed just like your traditional funds when distributed (withdrawn). The good news is that recent IRS rules make rolling over after-tax 401(k) contributions to a Roth IRA easier, so you've got that going for you. I'd recommend checking with a tax planner about your specific situation just to be sure.

Assuming the company doesn't offer a true-up and does match after-tax contributions, I think your best bet is to make the minimum after-tax contributions you need to capture the match. It's not ideal tax-wise, but it's not that bad and the match makes it worthwhile. When you leave the company you can roll it over, eventually getting those after-tax contributions into a Roth account (the earnings would still be traditional).

ETA: The IRS has a nice FAQ on after-tax distributions: https://www.irs.gov/retirement-plans/rollovers-of-after-tax-cont...

rated:
RhizzleBop said:   I  planned to max my 401K for this year by taking the max and dividing by all my pay checks and contributing pre tax to that each month.
I discovered today, that at the end of last year, I accidentally had a checks worth of contributions apply towards this year. (essentially, pay dates were for Dec 23rd to Dec 1st,  but I didn't get paid till Jan 8th, so all of that checks contributions applied to this year.

That means I reached the max this week, with 3 checks left.

If I can't contribute to my 401K the rest of the year, I can't earn the company 6% match.

I have a question in to HR to see if I can over contribute, so I can get the match and then in January ask for reimbursement of the overage, of which I'll pay taxes accordingly, and should be good.  Not sure they will let me do this though.

Another thing my local HR rep found, is that they said they saw where it looks like I could contribute to the 401K AFTER tax, by speaking directly with our brokerage, and then that would allow me to still get the 6% company match.

I am about to call the brokerage (Schwab) and see if they can get this done, but I'm thinking that is essentially a "ROTH" contribution, and I vaguely recall there were some rules and issues of having pre and post tax contributions sitting in the same account in regards to how those are handled, and future ramifications if I tried to do certain things later.

Can anyone speak to clarify this, and offer a suggestion on what they are talking about and what would make the most sense?

From a total retirement contribution standpoint, I launched a request this morning to raise my wifes 401k contribution to cover the deficit I can't do, so I can get funds in that way, but unless I figure something out with mine, i'll lose the co 6% for 3 checks.

  I would be wary of the HR rep "finding" out that it "looks like" you can do this or that.  The answers you seek are answered in your 401(k) plan documents.  Have your HR rep forward you a copy of the document.

After tax 401(k) contribution doesn't necessarily mean it is Roth 401(k).  A traditional 401(k) can accept after-tax contribution where the earnings attributed to the after-tax contribution are taxed upon withdrawal while the after-tax contribution will be withdrawn tax free.  The 401(k) plan document will tell you whether after-tax contribution are allowed and also if the plan even offers a Roth 401(k) option.

If your plan offers true-up, the 401(k) plan documents will call that out as well.

Bottom line is you need to get a copy of the 401(k) plan document.

rated:
Just to clarify, you are talking about the IRS maximum, right?  I only ask, because I've found that sometimes when people say, "I'm contributing the max to my 401k," they often mean the max to get their company match.  I've also heard people who think the IRS max applies to the combined total of their own funds and the company matching.

If your company does the true up, you're good.  If your company doesn't, I think I would be inclined to "accidentally" continue my contributions through the end of the year and plead ignorance.  Then let them refund the overage, and you still keep the matching.  It might not work though; the company payroll system might have an automatic stop on the contributions.

rated:
dcwilbur said:   Just to clarify, you are talking about the IRS maximum, right?  I only ask, because I've found that sometimes when people say, "I'm contributing the max to my 401k," they often mean the max to get their company match.  I've also heard people who think the IRS max applies to the combined total of their own funds and the company matching.

If your company does the true up, you're good.  If your company doesn't, I think I would be inclined to "accidentally" continue my contributions through the end of the year and plead ignorance.  Then let them refund the overage, and you still keep the matching.  It might not work though; the company payroll system might have an automatic stop on the contributions.

  Yes, I mean that I put 18K in the account through 23 pay checks.  The company contributed another 8% to that, but 2% is whether I contribute or not, and 6% is a match only, so I MUST put 6% in order to get their 6%.

My company does not do a true up.  I confirmed that directly from the HR Director of all of my global company.

I would over pay and make them refund me but their payroll system blocked it.  It shorted my contribution this pay cycle which I why I realized what happened, because my takehome was too much.

HR director said they cannot allow me to over contribute as its a violation of some code.

I just setup an after tax contribution just now, and wrote HR back to see if they can get that updated before next pay cycle so that I'll earn 3 more company matches this year.   I' not too worried about the small amount less takehome, I want to BE SURE i get their 6%.

The 401K support guy on the phone said the only possible issue he forsaw, was that if I ever tried to roll this 401K over to another vendor, that some 401Ks wont take after tax money, and it'll just simply not process.  If that happens I could choose to leave it in the current account and leave the account open, try to transfer it to another type of account like an IRA (I think he said) or withdraw it, and pay the 10% penalty on the after tax portion and so be it. (But I'd still get the companies 6%.


 

rated:
RhizzleBop said:   
dcwilbur said:   Just to clarify, you are talking about the IRS maximum, right?  I only ask, because I've found that sometimes when people say, "I'm contributing the max to my 401k," they often mean the max to get their company match.  I've also heard people who think the IRS max applies to the combined total of their own funds and the company matching.

If your company does the true up, you're good.  If your company doesn't, I think I would be inclined to "accidentally" continue my contributions through the end of the year and plead ignorance.  Then let them refund the overage, and you still keep the matching.  It might not work though; the company payroll system might have an automatic stop on the contributions.

  Yes, I mean that I put 18K in the account through 23 pay checks.  The company contributed another 8% to that, but 2% is whether I contribute or not, and 6% is a match only, so I MUST put 6% in order to get their 6%.

My company does not do a true up.  I confirmed that directly from the HR Director of all of my global company.

I would over pay and make them refund me but their payroll system blocked it.  It shorted my contribution this pay cycle which I why I realized what happened, because my takehome was too much.

HR director said they cannot allow me to over contribute as its a violation of some code.

I just setup an after tax contribution just now, and wrote HR back to see if they can get that updated before next pay cycle so that I'll earn 3 more company matches this year.   I' not too worried about the small amount less takehome, I want to BE SURE i get their 6%.

The 401K support guy on the phone said the only possible issue he forsaw, was that if I ever tried to roll this 401K over to another vendor, that some 401Ks wont take after tax money, and it'll just simply not process.  If that happens I could choose to leave it in the current account and leave the account open, try to transfer it to another type of account like an IRA (I think he said) or withdraw it, and pay the 10% penalty on the after tax portion and so be it. (But I'd still get the companies 6%.


 

  I was under the impression that Roth 401k and Traditional 401ks shared the same $18k max.  The $18k max applies to all 401(k) contributions regardless of whether or not it is after-tax (Roth) or pre-tax (traditional).  Is the company giving a match for contributing to a Roth IRA?

The  401k administrator can technically remove a contribution.  They do this if you have two jobs (two 401ks) and you accidentally over-contribute.  Not sure if they're required to help you out in this case though.

rated:
caterpillar123 said:   I was under the impression that Roth 401k and Traditional 401ks shared the same $18k max.  The $18k max applies to all 401(k) contributions regardless of whether or not it is after-tax (Roth) or pre-tax (traditional).  Is the company giving a match for contributing to a Roth IRA?
  
Traditional and Roth contributions combined have an $18k limit. There are also after-tax* and employer contributions. All contributions (traditional, Roth, employer, and after-tax) are limited to $54k/year.

*After-tax contributions are different from Roth contributions. With Roth contributions, the contributions and gains are not taxed upon withdrawal. With after-tax contributions, the contributions aren't taxed upon withdrawal but the gains are taxed upon withdrawal.

rated:
Your 401k website should allow you to shift your remaining contributions from 'Match Before Tax' to 'Match After-Tax' contributions. The 'Match After-Tax' contributions do not count towards the IRS' $18k limit and you'll still be able to take advantage of your company's match on these contributions.

rated:
RhizzleBop said:   
dcwilbur said:   Just to clarify, you are talking about the IRS maximum, right?  I only ask, because I've found that sometimes when people say, "I'm contributing the max to my 401k," they often mean the max to get their company match.  I've also heard people who think the IRS max applies to the combined total of their own funds and the company matching.

If your company does the true up, you're good.  If your company doesn't, I think I would be inclined to "accidentally" continue my contributions through the end of the year and plead ignorance.  Then let them refund the overage, and you still keep the matching.  It might not work though; the company payroll system might have an automatic stop on the contributions.

  Yes, I mean that I put 18K in the account through 23 pay checks.  The company contributed another 8% to that, but 2% is whether I contribute or not, and 6% is a match only, so I MUST put 6% in order to get their 6%.

My company does not do a true up.  I confirmed that directly from the HR Director of all of my global company.

I would over pay and make them refund me but their payroll system blocked it.  It shorted my contribution this pay cycle which I why I realized what happened, because my takehome was too much.

HR director said they cannot allow me to over contribute as its a violation of some code.

I just setup an after tax contribution just now, and wrote HR back to see if they can get that updated before next pay cycle so that I'll earn 3 more company matches this year.   I' not too worried about the small amount less takehome, I want to BE SURE i get their 6%.

The 401K support guy on the phone said the only possible issue he forsaw, was that if I ever tried to roll this 401K over to another vendor, that some 401Ks wont take after tax money, and it'll just simply not process.  If that happens I could choose to leave it in the current account and leave the account open, try to transfer it to another type of account like an IRA (I think he said) or withdraw it, and pay the 10% penalty on the after tax portion and so be it. (But I'd still get the companies 6%.


 

  Payroll will not knowingly let you over contribute the elective deferrals ($18k) or the annual additions ($53K in 2016; $54K in 2017) limits as it requires additional work for them to remove excess after the plan year closes.

As indicated by the support guy, if you ever change employers and choose to take the current 401(k) over to the new employer, the new plan may/may not accept rollovers of after-tax contribution (or any rollovers at all - rare).  Generally speaking, it's not a big deal.  As they explained it to you, there are several options for the after-tax portion.

  1. Leave the assets with current 401(k)
  2. Roll it into an IRA (possibly into a Roth IRA)
  3. Take it out (pay penalty)

rated:
After getting the word straight from the global HR director, and reviewing the 401K plan document, my only option was to fund with after tax money.

I setup 10% After tax to cover the min 6%, plus some extra since my pretax contribution was going down to zero.

I also bumped my wife's 401K up to further make up the net difference in how much could put in there.

Hopefully both will take effect for the last 3 checks of the year, and I'll be whole to my overall contribution Target.

Thanks for the suggestions guys.

rated:
RhizzleBop said:   I setup 10% After tax to cover the min 6%, plus some extra since my pretax contribution was going down to zero. 
 


Why not 6% in after-tax 401(k) and 4% in an IRA? You're not getting any tax advantage from the after-tax 401(k) unless you plan to roll over into a Roth IRA relatively soon.

rated:
doveroftke said:   
RhizzleBop said:   I setup 10% After tax to cover the min 6%, plus some extra since my pretax contribution was going down to zero. 

Why not 6% in after-tax 401(k) and 4% in an IRA? You're not getting any tax advantage from the after-tax 401(k) unless you plan to roll over into a Roth IRA relatively soon.


Two reasons
1. During the rush of the problem arising I did not think about the IRA.
2. At this time primarily we are using two IRA accounts as a college fund basis of tax deferred savings because 529 plans are a joke.

Since my wife and I currently do not max out our two 401Ks (I max mine, she puts a good deal but not max in hers) then it made sense to keep the deposits separate in a way because we have a min savings goal per year for our retirement and we have a separate college fund goal. So I needed to finish funding our retirement goal for 2016 and then once we calculate our taxes in early 2017 we will make a large lump deposit into our IRAs accounts for the college fund portion of the goal.

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