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401k catch up question
Old 11-17-2009, 10:14 PM   #1
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401k catch up question

I have a 53 year old friend and former coworker (I'm retired) who wants to take advantage of the catch up option to add to his 401k balance. However, when he called the benefits office they told him they don't allow that. Has anyone ever heard of this before? Can they stop him from doing the catch up? And why would they? I can't think of how it would hurt them in any way, since he has already maxed out the match. Do you think he might have just gotten a loser help desk person and should try again? Any thoughts would be appreciated.
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Old 11-17-2009, 10:19 PM   #2
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I found this...I don't know how accurate it is...

401k catch up contributions

Not all 401k plans offer catch up contributions nor are they required by law to do so.

If I were him, I'd talk to someone else though...just in case.
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Old 11-17-2009, 10:23 PM   #3
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Check this link:
401k contributions, ERISA, 401k compliance testing and 401k loans

The relevant quote (note underline):
"Catch-up contributions. For tax years beginning after 2001, a plan may permit participants who are age 50 or over at the end of the calendar year to make additional elective deferral contributions. These additional contributions (commonly referred to as catch-up contributions) are not subject to the general limits that apply to 401(k) plans. An employer is not required to provide for catch-up contributions in any of its plans. However, if your plan does allow catch-up contributions, it must allow all eligible participants to make the same election with respect to catch-up contributions. "

As far as WHY, I'm not sure. Could it have something to do with discrimination testing for HCEs?
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Old 11-18-2009, 10:04 AM   #4
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So, if one turns 50 in a particular calendar year (2010 for example), but plan on retiring the 1st of the month following their 50th birthday (say May 1st) does that mean the individual can put $17,500K (salary permitting obviously) into their 401k between Jan & April?
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Old 11-18-2009, 10:10 AM   #5
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One can make catch-up contributions while they are age 49 as long as they are age 50 by December 31st of that year. My spouse has a November birthday, so she made sure she was contributing enough since January in order to end up with $22,000 ($16,500 + $5,500) total.

If you make the money, you can put it in. So if your first paycheck is $25,000, then many companies will let you put in $22,000. Many companies have limited the percent of paycheck that you can contribute though. My spouse's limit is 90% and my limit is 75%.
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Old 11-18-2009, 10:13 AM   #6
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Originally Posted by Finance Dave View Post
As far as WHY, I'm not sure. Could it have something to do with discrimination testing for HCEs?
Either that or because their custodian's system isn't equipped to handle the catch-up provision. Sucks either way.
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Old 11-20-2009, 10:17 PM   #7
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My company also has the catch up plan up to $22K. This money can also be part of the company match.
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