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Roth 401k?
Old 09-18-2018, 11:50 PM   #1
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Roth 401k?

I became a HCE (high comp. employee) this year, so my 401k contribution has dropped to 10800 from 18k. According to my HR, they're now offering a Roth 401k and I can contribute up to 18500 with after-tax money for 2018.

reading up on the topic, https://nb.fidelity.com/public/nb/de...&tmsmd6=123025

not sure if I understand it correctly, is 18500 the max for the combo of
10800(pretax 401k) + 5500(Roth IRA) + 2200 (so called Roth 401k) ?

My 401k is with Fidelity and my Roth IRA is with Vanguard, if the above assumption is true, then do I open a Roth 401k with Fidelity and contribute 2200 to it? But I dont see a Roth 401k option in Fidelity tho.
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Old 09-19-2018, 01:08 AM   #2
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As I understand it, your 401K + Roth 401K can total up to 18,500 in contributions by you per year from your employment. You employer may add some which is called matching.

Additionally you can contribute to an outside on your own IRA or ROTH IRA up to 5,500. Here you will fund it with money from your bank account or pocket, it's not connected to your work. You will keep the same account even if you change employers.

Your HR dept should be able to add the ROTH 401K to the existing 401K work plan. Only employers can create and handle 401K plans, this is not something you go and do on your own, as the contributions will be coming from your paycheck. Your company 401K plan is tied to the company, if you go to another company, you cannot contribute to this 401K plan anymore.
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Old 09-19-2018, 01:10 AM   #3
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The reason your 401K contribution limit dropped when you became a HCE, is because not enough of your fellow employees who are not HCE, are not contributing enough to their 401K plans.
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Old 09-19-2018, 03:29 PM   #4
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You'll definitely need some clarification from your HR dept, but if you're contributing to your After Tax 401k, that's different than Roth 401k. I believe that the HCE limits apply to Roth and Traditional 401k. So, I'm assuming what your HR dept meant is that you can still only contribute $10,800 to your 401k (Roth or Traditional), but you can continue to contribute more than that to your After Tax 401k account. The limit of all 401k contributions (Traditional, Roth, After Tax, Employer Match, Profit Sharing, etc.) is something like $53k in 2018.

Again, you'll definitely want to get some clarification from your HR dept, because I'm nearly 100% sure that HCE limits the contributions to either Traditional or Roth 401k.
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Old 09-19-2018, 03:31 PM   #5
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Quote:
Originally Posted by Sunset View Post
The reason your 401K contribution limit dropped when you became a HCE, is because not enough of your fellow employees who are not HCE, are not contributing enough to their 401K plans.
and the plan is not a "safe harbor" 401k plan
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Old 09-19-2018, 10:35 PM   #6
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Quote:
Originally Posted by SkinsFan0521 View Post
You'll definitely need some clarification from your HR dept, but if you're contributing to your After Tax 401k, that's different than Roth 401k. I believe that the HCE limits apply to Roth and Traditional 401k. So, I'm assuming what your HR dept meant is that you can still only contribute $10,800 to your 401k (Roth or Traditional), but you can continue to contribute more than that to your After Tax 401k account. The limit of all 401k contributions (Traditional, Roth, After Tax, Employer Match, Profit Sharing, etc.) is something like $53k in 2018.

Again, you'll definitely want to get some clarification from your HR dept, because I'm nearly 100% sure that HCE limits the contributions to either Traditional or Roth 401k.
There certainly do appear to be limits across-the-board. According to the letter my husband got earlier this year from Vanguard, and I quote (bolding mine):

"As an HCE, your combined pre-tax and Roth 401(k) after-tax contributions may be no greater than 8% of your pay. You may also contribute up to 2% of your pay on a traditional after-tax basis. These limits prevent HCEs from having a taxable refund of contributions if the 401(k) plan fails compliance testing...Because catch-up contributions are not part of the compliance testing, you will still be able to make catch-up contributions up to the IRS limit of $6,000 for 2018."
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