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I’ve been considered an HCE in my company over the past few years, resulting in a cap on my allowable 401k contributions. I will be turning 50 next year; does anyone know if the “catch up” regs will eliminate the HCE limitations, or will I still be subject to them?
I know the best answer is to check with my HR/accounting department with my employer, but I’m not sure their knowledge base is up to par with many of the posters here...
From a few years ago the current HCE limitations will not change. BUT you will be able to contribute the full catch up in addition to the contributions you have been making.
catch up portion of your contribution is exempt from the limit as far as I know. I am an HCE as well and was capped at $14k this year which is frustrating.
I’ve been considered an HCE in my company over the past few years, resulting in a cap on my allowable 401k contributions. I will be turning 50 next year; does anyone know if the “catch up” regs will eliminate the HCE limitations, or will I still be subject to them?
I know the best answer is to check with my HR/accounting department with my employer, but I’m not sure their knowledge base is up to par with many of the posters here...
That said - Isn't this only an issue if your employer fails the ND test? Seems like your employer may need to work harder on their 401k education or offer some safe-harbor plans.
Seems like your employer may need to work harder on their 401k education or offer some safe-harbor plans.
In higher cost areas this can be a challenge. I am in SoCal and the cost of living is so high that even college educated dual income households earning a good wage can find it challenging to save.
The median household income for LA county is $56k and for OC it's $78k/yr. However, with 2 kids this isn't much. Rents are absolutely astronomical and a 2bd in a decent area with good schools can easily go north of $2k/month, that's $24k/yr. Add in the cost of all else that is also some of the highest in the country and it's not too realistic these people will be maxing out their 401ks.
In higher cost areas this can be a challenge. I am in SoCal and the cost of living is so high that even college educated dual income households earning a good wage can find it challenging to save.
The median household income for LA county is $56k and for OC it's $78k/yr. However, with 2 kids this isn't much. Rents are absolutely astronomical and a 2bd in a decent area with good schools can easily go north of $2k/month, that's $24k/yr. Add in the cost of all else that is also some of the highest in the country and it's not too realistic these people will be maxing out their 401ks.
Are the income stats you are quoting for dual college educated households?
That said - Isn't this only an issue if your employer fails the ND test? Seems like your employer may need to work harder on their 401k education or offer some safe-harbor plans.
They did fail the test. Unfortunately, many of our locations are in very rural areas with employees that aren’t making a lot, so they don’t have much left over to put away into a 401k.
From a few years ago the current HCE limitations will not change. BUT you will be able to contribute the full catch up in addition to the contributions you have been making.
So if I’ve been capped at $15,000 and the allowable “catch up” amount is $6,000 I will be able to contribute $21,000? I know that seems like a dumb question, but I just want to make sure I understand it correctly.
So if I’ve been capped at $15,000 and the allowable “catch up” amount is $6,000 I will be able to contribute $21,000? I know that seems like a dumb question, but I just want to make sure I understand it correctly.
Thank you!
That should be accurate. Your company could also make fixed contributions of 3% to all employees or offer a 1 to 1 match up to 4% and that would avoid the testing issue
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