401k question

[cosmowife]

I think so - I expect this to happen this year and that was what our account rep told me. He said they wouldn’t pull more than was permitted by law.

ETA I should add that I don’t know for sure since this is my first year maxing so I haven’t actually seen it happen yet.

[Tacocat]

Most payroll systems are set up to automatically stop once you reach the threshold for the year. However, you may want to check with whoever does payroll for your company to make sure.

[OG Jo]

Oct 18, 2019 13:26:15 GMT -5 Tacocat said:

Most payroll systems are set up to automatically stop once you reach the threshold for the year. However, you may want to check with whoever does payroll for your company to make sure.

This.  Our payroll system has built in limits that are updated every year and we will automatically stop withholding for 401k (or OASDI, etc.) when you hit the max limit.

[savan]

This is company dependent. DH's company automatically switches from pretax to after tax when you reach the limit. Contributions continue on an after tax basis until the end of the year.

[lilafowler]

Are you allowed to make after-tax contributions in your plan? If so some plans will automatically switch you over to AT after reaching the PT limit. Otherwise they should automatically stop when you reach the limit.

You dumbass you could have asked me

[Mrs.flang]

You may want to also check how your company matches if they do. Sometimes they will make a matching contribution based on % of your salary but if you are maxed out and no longer contributing, the matching stops. If that's the case you'd be better if you try to spread your contributions more so that every paycheck you are making a contribution and will get a match.

[mccallister84]

Ours didn’t last year. It just started taking taxes out of the money before it put it in.

[MixedBerryJam]

Oct 18, 2019 13:32:07 GMT -5 lilafowler said:

Are you allowed to make after-tax contributions in your plan? If so some plans will automatically switch you over to AT after reaching the PT limit. Otherwise they should automatically stop when you reach the limit.

You dumbass you could have asked me

Maybe she knows you're busy refining your itinerary for Your Day Someplace and didn't want to interrupt.

[kadams767]

Oct 18, 2019 13:40:10 GMT -5 Mrs.flang said:

You may want to also check how your company matches if they do. Sometimes they will make a matching contribution based on % of your salary but if you are maxed out and no longer contributing, the matching stops. If that's the case you'd be better if you try to spread your contributions more so that every paycheck you are making a contribution and will get a match.

Was just coming in to say this.  This happened to my husband last year and he ended up losing out on a portion of his match.  His company won't let him set up his contributions as a set dollar amount each pay period, it has to be a percentage, so they took the percentage from his bonus plus he got a raise mid-year.  So he maxed out several pay periods early and missed out on free money from his company.  

[kadams767]

Oct 18, 2019 14:07:55 GMT -5 mofongo said:

Oct 18, 2019 13:56:34 GMT -5 kadams767 said:

Was just coming in to say this.  This happened to my husband last year and he ended up losing out on a portion of his match.  His company won't let him set up his contributions as a set dollar amount each pay period, it has to be a percentage, so they took the percentage from his bonus plus he got a raise mid-year.  So he maxed out several pay periods early and missed out on free money from his company.  

I feel like I’m gonna have to do some advanced math to figure this out lol. He can only do X% to the 401k bc he’s considered highly compensated, so the rest it to a 403b, I picked a random % and guess I overshot.

It is honestly so ridiculous.  I don't understand why they wouldn't just do a true-up for him, it isn't as though he was an employee for a partial year or something, or didn't contribute enough.  

[kooshball]

Ours does.... and then I add the after tax 401k so I keep going.

[definitelyO]

our payroll will stop the withholdings automatically. we don't have an after-tax option - so the withholdings will automatically stop.

we also do quarterly true-ups. I max prior to year end and then they true up (our match is 100% of 6%) - so it's a nice amount.

[isabel]

Oct 18, 2019 13:40:10 GMT -5 Mrs.flang said:

You may want to also check how your company matches if they do. Sometimes they will make a matching contribution based on % of your salary but if you are maxed out and no longer contributing, the matching stops. If that's the case you'd be better if you try to spread your contributions more so that every paycheck you are making a contribution and will get a match.

Can you explain this like I’m 5? If you get a match, don’t you just get the match up to the max you can contribute? Why does it matter how many pay periods you contribute across?

[kadams767]

Oct 19, 2019 15:16:16 GMT -5 isabel said:

Oct 18, 2019 13:40:10 GMT -5 Mrs.flang said:

You may want to also check how your company matches if they do. Sometimes they will make a matching contribution based on % of your salary but if you are maxed out and no longer contributing, the matching stops. If that's the case you'd be better if you try to spread your contributions more so that every paycheck you are making a contribution and will get a match.

Can you explain this like I’m 5? If you get a match, don’t you just get the match up to the max you can contribute? Why does it matter how many pay periods you contribute across?

Some companies take the word “match” quite literally, so they only contribute their part for as long as the employee is contributing.  If an employee doesn’t contribute for one or more pay periods, there is nothing to match, so to speak.  So if the company match is 3%, they only give 3% for so long as you give your required portion to earn the match.  It’s ridiculous, IMO, for employees that work the full year and/or contribute the required amount to get the full match, but not all companies will do a true-up match for you at year end, so you need to check.  

[isabel]

Oct 19, 2019 15:54:05 GMT -5 kadams767 said:

Oct 19, 2019 15:16:16 GMT -5 isabel said:

Can you explain this like I’m 5? If you get a match, don’t you just get the match up to the max you can contribute? Why does it matter how many pay periods you contribute across?

Some companies take the word “match” quite literally, so they only contribute their part for as long as the employee is contributing.  If an employee doesn’t contribute for one or more pay periods, there is nothing to match, so to speak.  So if the company match is 3%, they only give 3% for so long as you give your required portion to earn the match.  It’s ridiculous, IMO, for employees that work the full year and/or contribute the required amount to get the full match, but not all companies will do a true-up match for you at year end, so you need to check.  

Huh. I had no idea! I guess I should check on our plan, though it doesn’t matter yet since I’m not able to max it out yet.

[ribollita]

My employer doesn’t top up the match. It’s annoying.

[4speedy]

Oct 18, 2019 13:31:26 GMT -5 savan said:

This is company dependent. DH's company automatically switches from pretax to after tax when you reach the limit. Contributions continue on an after tax basis until the end of the year.

This is how DH’s company handles it.  Then DH transfers the overage to a Roth IRA.  I believe that’s the only way we qualify for a ROTH IRA.  DH hasn’t made specific mention of needing to do the transfer in a couple of years so it is possible this is no longer the case.