Incomplete contribution to 401K for this year

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ensamya
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Joined: Tue Dec 06, 2016 11:42 am

Incomplete contribution to 401K for this year

Post by ensamya » Tue Dec 06, 2016 11:49 am

I made some adjustments to my percentage of contribution to the employer sponsored 401K early this year whereby I reduced the amount of contribution significantly. I forgot to increase the percentage of contribution. I just realized that I have contributed only 11K out of the 18K I am eligible to contribute for this year. The max contribution percentage fidelity allows is 75% which will not be enough to make it to 18K in 401K. What can I do at this point to max out the contribution. Should I contribute to Roth 401K also at this time? I still have 2 paychecks left for this year.

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Slick8503
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Re: Incomplete contribution to 401K for this year

Post by Slick8503 » Tue Dec 06, 2016 11:31 pm

Could possibly check to see if your plan allows for depositing a personal check into your account. Mine does not, but some may.

avalpert
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Re: Incomplete contribution to 401K for this year

Post by avalpert » Tue Dec 06, 2016 11:48 pm

Slick8503 wrote:Could possibly check to see if your plan allows for depositing a personal check into your account. Mine does not, but some may.
No, all 401k deposits must come from payroll reductions to your paycheck.

OP - if the max of the plan is 75% of salary and that won't be enough to hit the maximum then there is nothing you can do. No reason to consider a Roth 401k unless you would have been btter off doing that anyway - still preferable to do traditional under the minimum. Check if you are eligible for deductible IRA, Roth IRA or consider a backdoor Roth for additional tax-advantaged investment options this year.

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Slick8503
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Re: Incomplete contribution to 401K for this year

Post by Slick8503 » Tue Dec 06, 2016 11:50 pm

Thank you for the correction avalpert. I was unaware it was law for contributions to be from payroll deduction.

gus1961
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Re: Incomplete contribution to 401K for this year

Post by gus1961 » Wed Dec 07, 2016 12:37 am

avalpert wrote: ..... Check if you are eligible for deductible IRA, Roth IRA or consider a backdoor Roth for additional tax-advantaged investment options this year.
If the full $18k is not contributed to the 401k, can the difference be deposited into a different Trad IRA? Source of the contribution would be after-tax monies from savings.

TIAX
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Re: Incomplete contribution to 401K for this year

Post by TIAX » Wed Dec 07, 2016 12:43 am

gus1961 wrote:
avalpert wrote: ..... Check if you are eligible for deductible IRA, Roth IRA or consider a backdoor Roth for additional tax-advantaged investment options this year.
If the full $18k is not contributed to the 401k, can the difference be deposited into a different Trad IRA? Source of the contribution would be after-tax monies from savings.
No, the limits are separate. You could try to contribute more than 75% and see if your plan will enforce the rule.

TIAX
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Re: Incomplete contribution to 401K for this year

Post by TIAX » Wed Dec 07, 2016 12:49 am

If you have any self employed income for 2016, you could open an individual 401(k) and contribute the remainder of the 18k.

ensamya
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Re: Incomplete contribution to 401K for this year

Post by ensamya » Wed Dec 07, 2016 9:40 am

avalpert wrote: No reason to consider a Roth 401k unless you would have been btter off doing that anyway - still preferable to do traditional under the minimum. Check if you are eligible for deductible IRA, Roth IRA or consider a backdoor Roth for additional tax-advantaged investment options this year.
What do you mean by "unless you would have been better off doing that anyway"?

I do contribute to backdoor Roth.
TIAX wrote:If you have any self employed income for 2016, you could open an individual 401(k) and contribute the remainder of the 18k.
I don't have self employed income :(
TIAX wrote:You could try to contribute more than 75% and see if your plan will enforce the rule.
I will call fidelity and ask them if they will consider.

But looks like my options are limited.

avalpert
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Re: Incomplete contribution to 401K for this year

Post by avalpert » Wed Dec 07, 2016 9:47 am

ensamya wrote:
avalpert wrote: No reason to consider a Roth 401k unless you would have been btter off doing that anyway - still preferable to do traditional under the minimum. Check if you are eligible for deductible IRA, Roth IRA or consider a backdoor Roth for additional tax-advantaged investment options this year.
What do you mean by "unless you would have been better off doing that anyway"?
I mean, unless based on your tax situation a Roth 401k was always preferable to a traditional 401k it won't be now.
TIAX wrote:You could try to contribute more than 75% and see if your plan will enforce the rule.
I will call fidelity and ask them if they will consider.

But looks like my options are limited.
It isn't up to Fidelity, that limit will be set in your plan documents (as chosen by your employer when they established the plan) - they cannot make exceptions to it.

goingup
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Re: Incomplete contribution to 401K for this year

Post by goingup » Wed Dec 07, 2016 9:55 am

You'll probably have to start with your HR dept. to see if they can restart your contributions, with the max allowance for the next 2 pay periods. Don't be surprised if they can't do it because the window of time is too tight. If not, just make sure to choose the correct % contribution amount beginning with the first pay period in January.

I always found it better to set up the 401K contribution and leave it alone. Changes always seemed to go wrong.

TIAX
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Re: Incomplete contribution to 401K for this year

Post by TIAX » Thu Dec 08, 2016 11:27 am

avalpert wrote:
TIAX wrote:You could try to contribute more than 75% and see if your plan will enforce the rule.
It isn't up to Fidelity, that limit will be set in your plan documents (as chosen by your employer when they established the plan) - they cannot make exceptions to it.
Can't make exceptions but can be bad at their job.

orca91
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Re: Incomplete contribution to 401K for this year

Post by orca91 » Thu Dec 08, 2016 11:36 am

Stop worrying about it and max it out next year sounds like a good plan. :happy

Trying to figure this out as we approach mid December is probably an exercise in futility. If I make a change to my contributions, the change doesn't even kick in until the following month. You're probably at least already in one of the two pay periods you have left for the year. Even if your plan makes changes quicker than mine, it may not happen this pay period... or, likely wouldn't. So, you're down to one pay check left...

Chalk it up to a lesson learned and look forward to 2017.

avalpert
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Re: Incomplete contribution to 401K for this year

Post by avalpert » Thu Dec 08, 2016 12:07 pm

TIAX wrote:
avalpert wrote:
TIAX wrote:You could try to contribute more than 75% and see if your plan will enforce the rule.
It isn't up to Fidelity, that limit will be set in your plan documents (as chosen by your employer when they established the plan) - they cannot make exceptions to it.
Can't make exceptions but can be bad at their job.
Yeah, the HR person could be bad at their jobs - but eventually the auditors (or worse the IRS) will catch it and it will end up being a pain in your ass to unwind.

TIAX
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Joined: Sat Jan 11, 2014 12:19 pm

Re: Incomplete contribution to 401K for this year

Post by TIAX » Fri Dec 09, 2016 4:33 pm

avalpert wrote:
TIAX wrote:
avalpert wrote:
TIAX wrote:You could try to contribute more than 75% and see if your plan will enforce the rule.
It isn't up to Fidelity, that limit will be set in your plan documents (as chosen by your employer when they established the plan) - they cannot make exceptions to it.
Can't make exceptions but can be bad at their job.
Yeah, the HR person could be bad at their jobs - but eventually the auditors (or worse the IRS) will catch it and it will end up being a pain in your ass to unwind.
Are you so sure you'd have to unwind it?

jordank
Posts: 46
Joined: Thu Dec 18, 2014 12:36 am

Re: Incomplete contribution to 401K for this year

Post by jordank » Fri Dec 09, 2016 9:31 pm

Any chance that an end-of-year bonus can be redirected into the 401k? (obviously the assumptions there are that you do have a bonus, and that the rules (and HR) permit it).

When my DW left a job a while back (after the company she worked for was merged into another sister company) she was able to redirect some of the final 'payout' into a 401k. Not really a 'bonus' as such, but it was a somewhat non-standard payroll event...

Failing those, I agree your best bet is to talk to HR (if the department is big enough, try to talk to at least 2 different people, the higher and more experienced they are - the better). Junior HR staff may simply not know what the 'non-standard' options are...

ERISA Stone
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Re: Incomplete contribution to 401K for this year

Post by ERISA Stone » Sat Dec 10, 2016 9:16 am

TIAX wrote:
avalpert wrote:
TIAX wrote:
avalpert wrote:
TIAX wrote:You could try to contribute more than 75% and see if your plan will enforce the rule.
It isn't up to Fidelity, that limit will be set in your plan documents (as chosen by your employer when they established the plan) - they cannot make exceptions to it.
Can't make exceptions but can be bad at their job.
Yeah, the HR person could be bad at their jobs - but eventually the auditors (or worse the IRS) will catch it and it will end up being a pain in your ass to unwind.
Are you so sure you'd have to unwind it?
I'm not sure what this comment means but if the maximum deferral % is 75%, and if a participant is allowed to exceed that limit, it is an operational failure. It won't make it past the TPA review in the following year because that is an easy issue to spot. Assuming the TPA's cost structure is like most, the company will have to pay an additional fee to calculate the amount to be refunded and distributed. It might be a small amount but I'm not sure how you make the justification that the company should have to cover that.

To further that, personally I would have an ethical issue with trying to break the rules and potentially cost someone else money in an attempt to override a mistake that I made.

ETA: Posters on benefitslink.com indicate that this issue might have to go through the EPCRS process to resolve. So the company would be in 4 figures of expenses to resolve this issue if that were the case. http://benefitslink.com/boards/index.ph ... lan-limit/

TIAX
Posts: 1022
Joined: Sat Jan 11, 2014 12:19 pm

Re: Incomplete contribution to 401K for this year

Post by TIAX » Sat Dec 10, 2016 6:03 pm

ERISA Stone wrote:
TIAX wrote:
avalpert wrote:
TIAX wrote:
avalpert wrote:

It isn't up to Fidelity, that limit will be set in your plan documents (as chosen by your employer when they established the plan) - they cannot make exceptions to it.
Can't make exceptions but can be bad at their job.
Yeah, the HR person could be bad at their jobs - but eventually the auditors (or worse the IRS) will catch it and it will end up being a pain in your ass to unwind.
Are you so sure you'd have to unwind it?
I'm not sure what this comment means but if the maximum deferral % is 75%, and if a participant is allowed to exceed that limit, it is an operational failure. It won't make it past the TPA review in the following year because that is an easy issue to spot. Assuming the TPA's cost structure is like most, the company will have to pay an additional fee to calculate the amount to be refunded and distributed. It might be a small amount but I'm not sure how you make the justification that the company should have to cover that.

To further that, personally I would have an ethical issue with trying to break the rules and potentially cost someone else money in an attempt to override a mistake that I made.

ETA: Posters on benefitslink.com indicate that this issue might have to go through the EPCRS process to resolve. So the company would be in 4 figures of expenses to resolve this issue if that were the case. http://benefitslink.com/boards/index.ph ... lan-limit/
We're talking about a percentage of the total comp for the year but on the contribution % per pay period. Does the TPA review even check each contribution per period as a percentage of that pay period's compensation?

ERISA Stone
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Joined: Tue Jun 24, 2014 8:54 am

Re: Incomplete contribution to 401K for this year

Post by ERISA Stone » Sat Dec 10, 2016 6:49 pm

TIAX wrote:
ERISA Stone wrote:
TIAX wrote:
avalpert wrote:
TIAX wrote: Can't make exceptions but can be bad at their job.
Yeah, the HR person could be bad at their jobs - but eventually the auditors (or worse the IRS) will catch it and it will end up being a pain in your ass to unwind.
Are you so sure you'd have to unwind it?
I'm not sure what this comment means but if the maximum deferral % is 75%, and if a participant is allowed to exceed that limit, it is an operational failure. It won't make it past the TPA review in the following year because that is an easy issue to spot. Assuming the TPA's cost structure is like most, the company will have to pay an additional fee to calculate the amount to be refunded and distributed. It might be a small amount but I'm not sure how you make the justification that the company should have to cover that.

To further that, personally I would have an ethical issue with trying to break the rules and potentially cost someone else money in an attempt to override a mistake that I made.

ETA: Posters on benefitslink.com indicate that this issue might have to go through the EPCRS process to resolve. So the company would be in 4 figures of expenses to resolve this issue if that were the case. http://benefitslink.com/boards/index.ph ... lan-limit/
We're talking about a percentage of the total comp for the year but on the contribution % per pay period. Does the TPA review even check each contribution per period as a percentage of that pay period's compensation?
Fair enough. It wouldn't get caught then by the TPA at year end. If the plan is audited annually, it could be caught if the OP's account were picked for review. That doesn't change the fact that it's an operational failure that could cost the company money.

TIAX
Posts: 1022
Joined: Sat Jan 11, 2014 12:19 pm

Re: Incomplete contribution to 401K for this year

Post by TIAX » Sun Dec 11, 2016 1:00 pm

ERISA Stone wrote:
TIAX wrote:
ERISA Stone wrote:
TIAX wrote:
avalpert wrote: Yeah, the HR person could be bad at their jobs - but eventually the auditors (or worse the IRS) will catch it and it will end up being a pain in your ass to unwind.
Are you so sure you'd have to unwind it?
I'm not sure what this comment means but if the maximum deferral % is 75%, and if a participant is allowed to exceed that limit, it is an operational failure. It won't make it past the TPA review in the following year because that is an easy issue to spot. Assuming the TPA's cost structure is like most, the company will have to pay an additional fee to calculate the amount to be refunded and distributed. It might be a small amount but I'm not sure how you make the justification that the company should have to cover that.

To further that, personally I would have an ethical issue with trying to break the rules and potentially cost someone else money in an attempt to override a mistake that I made.

ETA: Posters on benefitslink.com indicate that this issue might have to go through the EPCRS process to resolve. So the company would be in 4 figures of expenses to resolve this issue if that were the case. http://benefitslink.com/boards/index.ph ... lan-limit/
We're talking about a percentage of the total comp for the year but on the contribution % per pay period. Does the TPA review even check each contribution per period as a percentage of that pay period's compensation?
Fair enough. It wouldn't get caught then by the TPA at year end. If the plan is audited annually, it could be caught if the OP's account were picked for review. That doesn't change the fact that it's an operational failure that could cost the company money.
While this is certainly helpful for OP to know, I'm not sure how much one should worry about the employer possibly incurring this cost in a few years. And according to the benefitslink thread you posted, it looks like the employer may make a retroactive amendment to allow the contribution anyway.

ERISA Stone
Posts: 1474
Joined: Tue Jun 24, 2014 8:54 am

Re: Incomplete contribution to 401K for this year

Post by ERISA Stone » Sun Dec 11, 2016 1:44 pm

TIAX wrote:
ERISA Stone wrote:
TIAX wrote:
ERISA Stone wrote:
TIAX wrote:
Are you so sure you'd have to unwind it?
I'm not sure what this comment means but if the maximum deferral % is 75%, and if a participant is allowed to exceed that limit, it is an operational failure. It won't make it past the TPA review in the following year because that is an easy issue to spot. Assuming the TPA's cost structure is like most, the company will have to pay an additional fee to calculate the amount to be refunded and distributed. It might be a small amount but I'm not sure how you make the justification that the company should have to cover that.

To further that, personally I would have an ethical issue with trying to break the rules and potentially cost someone else money in an attempt to override a mistake that I made.

ETA: Posters on benefitslink.com indicate that this issue might have to go through the EPCRS process to resolve. So the company would be in 4 figures of expenses to resolve this issue if that were the case. http://benefitslink.com/boards/index.ph ... lan-limit/
We're talking about a percentage of the total comp for the year but on the contribution % per pay period. Does the TPA review even check each contribution per period as a percentage of that pay period's compensation?
Fair enough. It wouldn't get caught then by the TPA at year end. If the plan is audited annually, it could be caught if the OP's account were picked for review. That doesn't change the fact that it's an operational failure that could cost the company money.
While this is certainly helpful for OP to know, I'm not sure how much one should worry about the employer possibly incurring this cost in a few years. And according to the benefitslink thread you posted, it looks like the employer may make a retroactive amendment to allow the contribution anyway.
I respectfully disagree with that particular poster. Yes, a company may complete a retroactive amendment to resolve issues based on required law changes. However, a cap on a plan deferral rate doesn't meet a required law on any level. That's an affirmative election made by the plan sponsor. To further your point though, you might be able to find some consultants who take the opposite point of view (obviously there's already 1!).

TIAX
Posts: 1022
Joined: Sat Jan 11, 2014 12:19 pm

Re: Incomplete contribution to 401K for this year

Post by TIAX » Sun Dec 11, 2016 4:09 pm

ERISA Stone wrote: I respectfully disagree with that particular poster. Yes, a company may complete a retroactive amendment to resolve issues based on required law changes. However, a cap on a plan deferral rate doesn't meet a required law on any level. That's an affirmative election made by the plan sponsor. To further your point though, you might be able to find some consultants who take the opposite point of view (obviously there's already 1!).
Thanks for clarifying that a retroactive amendment would not be appropriate in this case. What do you see as the risk to the employee if he or she exceeds the plan contribution limit?

nyclon
Posts: 225
Joined: Fri Oct 02, 2015 5:30 pm

Re: Incomplete contribution to 401K for this year

Post by nyclon » Sun Dec 11, 2016 10:38 pm

ensamya wrote:I made some adjustments to my percentage of contribution to the employer sponsored 401K early this year whereby I reduced the amount of contribution significantly. I forgot to increase the percentage of contribution. I just realized that I have contributed only 11K out of the 18K I am eligible to contribute for this year. The max contribution percentage fidelity allows is 75% which will not be enough to make it to 18K in 401K. What can I do at this point to max out the contribution. Should I contribute to Roth 401K also at this time? I still have 2 paychecks left for this year.
Ask HR to prepay you for January.

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