Defined contribution plan. For 2012, a defined contribution plan's annual contributions and other additions (excluding earnings) to the account of a participant cannot exceed the lesser of the following amounts.
100% of the participant's compensation.
Oilburner wrote:.... But if for some reason your employer lets you contribute too much, you have to file with the IRS to correct the error. I am not sure about those details.
beachmom wrote:Thanks for the help.
I did the math and realized I might not hit the Max even if I go with 100%. I can't change my contribution until July 1. Connya's comment is a concern but since I have only contributed 12 % of my pay so far the annual total won't be 100%. Negative paychecks after ss/ Medicare could be a problem.
I am not confident of my employer's ability to deal with an overage. HR told me today no one has ever maxed their contribution. It is a small young company.
I like the advice about writing myself a check every payday. I was a little worried how I would feel working and getting no immediate pay.
The lump sum is taxable but we have a large cost basis so I estimate my net taxable will be about $40000 to $50000. I will be calling my Cpa to see if we need to do anything like start quarterly tax payments.
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