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Old 12-22-2011, 02:27 PM   #21
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Originally Posted by John Galt III View Post
Thanks for the replies. I think I will just keep an eye on it, and make sure the contibs are stopped before going over the max. I don't have to worry about the employer match since there isn't any. They do have profit sharing, of about $2K per year, for which you must simply be enrolled in the 401K plan, even if you contribute none of your paycheck.

Something interesting I noticed was that in the plan administrator's website, which allows you to tweak all your investment parameters, they have 2 different cells on the screen for the $16,500 and the $5,500. The implication is that you can be contributing portions of each pay period to both the $16,500 and $5,500 simultaneously. (You don't have to max out the $16,500 before contributing to the $5,500. )
When I was contributing, I found that I had to elect catchup contributions separately from the normal contributions or else what I was intending to be catchup contributions would automatically become after tax contributions.
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Old 12-22-2011, 07:47 PM   #22
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My son accidently did this when he had switched jobs, which of course meant that the new employer did not keep track of his contributions for the 1st employer. If you do not take the money out by the tax deadline, you pay tax on the excess twice, once in the year of excess deferral, and a 2nd t ime when you take it out. It was a real PITA to fix, even thou he got the money out in time, ( amended tax return ) and then a 1099 R reports the excess removed from the account but taxable in the prior year.
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Old 12-22-2011, 08:27 PM   #23
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If you know how much you contributed to your previous plan, you may be able to talk to your current payroll dept before they put you over. That is by far the easiest solution if you are anticipating going over on the last check but haven't yet.
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Old 12-22-2011, 10:33 PM   #24
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Every 401K must be different and you should check with your HR dept.

About 6 yrs ago I had my pre-tax maxed out by by Sept. So, I went in and changed my contributions to $0. WRONG MOVE!!

I got a letter saying I would have to pay taxes on the money I contributed that year because I elected to stop contributions. So, I immediately went to HR and they took care of it. What I ended up doing was putting the minimun in and it went to after tax.

I really don't see anything wrong with some after tax contributions. When you get older(like I am getting!!), you only have to pay taxes on the money you made on the after tax contributions. As a matter of fact, I needed money one yr for a bridge. I was over 58 so they took it all out from my after tax and I paid very little taxes on it.
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Old 12-22-2011, 10:43 PM   #25
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This year my 401k deductions were stopped automatically when I hit the $22k limit with catch up contribution. Our plan was different a few years ago - I went over the limit and IIRC, I received a 1099 to pay tax on the excess.
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Old 12-23-2011, 07:58 AM   #26
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I switched companies in 2009, so I had two 401k plans to keep track of. I kept adjusting the contribution rate with the new company downward as I got closer to the end of the year, and ended up going over the $16,500 limit by something like $32. So I guess I did pretty good!

To sort that out, I had to fill out an excess deferral form, or something like that, that the new company provided. All I had to do was fill it out, and attach something that showed how much I had put into my other 401k, and then they mailed me my $32 back. And, come tax time, I had to pay taxes on that $32.
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Old 12-23-2011, 08:02 AM   #27
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We got a notice that the limits were changing next year to $17000 and the catchup stays at $5500..I thought the catchup limits were $6000? Or is that the limit for the Roth/Ira amount
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Old 12-23-2011, 08:20 AM   #28
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Correcting the excess

If you don't correct an excess contribution, you'll end up with double taxation: you're taxed on that money in the year you earn it and also in the year you take the money out of your account. To avoid that result you have to take a corrective distribution by April 15 of the following year. The corrective distribution will include the dollar amount necessary to bring your contributions within the limit, plus any investment earnings on that extra money for the time it was in your account.
You can take the corrective distribution from any account. For example, you might start out contributing to a traditional account and later contribute to a Roth account. It might seem logical that the Roth account is where you have the excess, because that's where you made the later contributions that put you over the limit. But you can choose to take the corrective distribution from the traditional account if that seems like better planning. Likewise, when two or more employers are involved, you can take the corrective distribution from the plan where you made the earlier contribution if you can get the former employer to cooperate. The key is to get your total down to the limit with a distribution from some account by April 15.
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Old 12-23-2011, 09:01 PM   #29
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If you don't correct an excess contribution, you'll end up with double taxation: you're taxed on that money in the year you earn it and also in the year you take the money out of your account.
OK, I think I know what you're talking about now. If you are a highly compensated employee, you are only allowed the $22K this year.

But, if you are a regular payed employee like myself, you can put up to 49K into your 401K. I was reading your response to my husband and he reminded me of a couple yrs ago when he made too much because of overtime and his employer immediately quit putting money into his account.

But, I never had to worry about that.
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