Maxed out 401K now switched job. New employer auto enrolled in 401K.

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sksbog
Posts: 119
Joined: Wed Jun 20, 2012 9:14 pm

Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by sksbog » Fri Aug 11, 2017 9:01 pm

Hello Bogleheads,

Earlier this year, i was afraid of getting laid off. So I aggressively contributed to my 401 K, in order to front load it, just in case I loose my job.
Fast forward now, I have contributed max 18K to my 401 with previous employer and started working for a new employer who matches 6% ( more than previous employer).

The new employer auto enrolls 3% of my portion of paycheck to 401 K.

Should I let it be that or change it to zero?

Thanks

BanditKing
Posts: 534
Joined: Tue Oct 29, 2013 11:11 pm

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by BanditKing » Fri Aug 11, 2017 9:09 pm

I believe you can contribute to the new 401k, but before April 15 you'll need to claw back the excess contribution plus gains (and pay taxes on it). However, the employer match doesn't need to be returned, so you definitely want to put in enough to get full employer match. As long as your deferred amount is =<$18k in the end you should be good.

runner3081
Posts: 647
Joined: Mon Aug 22, 2016 3:22 pm

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by runner3081 » Fri Aug 11, 2017 9:28 pm

Change it to 0, don't over-contribute. The limit is shared across multiple employers.

Helo80
Posts: 375
Joined: Sat Apr 29, 2017 8:47 pm

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by Helo80 » Fri Aug 11, 2017 9:35 pm

I assume that the 6% and 3% are employer match based upon your salary, correct?

Anyways... it's honestly not that big of a deal. Calculate how much you'd contribute with the 3% match with your new employer until your last tax year 2017 paycheck. Then, contact your old 401k administrator and ask about a refund in that amount. There are mechanisms in place for instances like this where you over contribute (as most 401k administrators will block you from over contributing at $18k).

https://www.irs.gov/retirement-plans/pl ... the-limits

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Earl Lemongrab
Posts: 2680
Joined: Tue Jun 10, 2014 1:14 am

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by Earl Lemongrab » Sun Aug 13, 2017 7:38 pm

Check to see if the new employer allows the contributions to be after tax (not Roth) with matching, and allows rolling out the contributions to do Mega Backdoor Roth. You could do that at Megacorp, for instance.
This week's fortune cookie: "The stock market may be your ticket to success." I sure hope so!

IvestForEngineers
Posts: 9
Joined: Sat Apr 29, 2017 11:11 am
Location: Seattle

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by IvestForEngineers » Mon Aug 14, 2017 4:01 pm

sksbog wrote:
Fri Aug 11, 2017 9:01 pm
Hello Bogleheads,

Earlier this year, i was afraid of getting laid off. So I aggressively contributed to my 401 K, in order to front load it, just in case I loose my job.
Fast forward now, I have contributed max 18K to my 401 with previous employer and started working for a new employer who matches 6% ( more than previous employer).

The new employer auto enrolls 3% of my portion of paycheck to 401 K.

Should I let it be that or change it to zero?

Thanks
If I were you I would let the new employer make contributions - so that they can match and you can call administrator and take out excessive contributions. I did exact thing 2 years back. Good thing with this is - you don't have to take out new employer matching contributions out.

BusterMcTaco
Posts: 45
Joined: Tue Jul 11, 2017 6:36 pm

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by BusterMcTaco » Mon Aug 14, 2017 4:06 pm

Just heads up that, depending on the 401k provider, getting your money back can be a PITA. We overcontributed due to the fault of the new 401k provider (Ubiquity--no surprise there). They "corrected" it, but took a $65 processing fee and a $30 check fee out of our account. Again, this was their fault, as we had notified them the stop deferrals at an exact amount (it was part of their intake process).

I complained to them and they instead sent me checks for $60 and $35. So essentially it's a distribution. They say it won't be reported as a distribution. Who the heck knows at this point.

Since it sounds like you're talking serious enough money it may be worth the headache.

Spirit Rider
Posts: 6233
Joined: Fri Mar 02, 2007 2:39 pm

Re: Maxed out 401K now switched job. New employer auto enrolled in 401K.

Post by Spirit Rider » Mon Aug 14, 2017 6:07 pm

One thing to keep in mind is that the IRS regulations do not require a plan to return excess deferrals.

Many plans will not return excess deferrals caused by deferrals at a subsequent employer.

Therein lies the catch 22.

If you ask the previous plan if they will return excess deferrals after the end of the year, that is proof that the new deferrals are intentionally excess.

If you wait until after the end of the year and they say no, it was a waste of time. Contrary to a previous reply, I am reasonably certain matches on excess deferrals are also forfeited.

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