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Old 11-10-2014, 07:49 AM   #21
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Originally Posted by Senator View Post
By law, the max is the max. $23,500 for 2014. For all 401Ks and Roth 401Ks. We have a Roth 401K option too, but the max doesn't change.

I did read this article, and you may have a good thing going. Your after tax 401K might be able to be rolled over into a Roth IRA.
If I read the article correctly, it talks of contributing after you hit the $23K limit

In fact, it appears that the new IRS rules are so open in this regard, that they not only permit the free conversion of after-tax 401(k) contributions into a subsequent Roth IRA, but the availability of this conversion makes it more appealing than ever to make after-tax contributions into a 401(k) plan in the first place (at least after first obtaining the employer 401(k) match and maxxing out available pre-tax or Roth contribution limits). Will the new rules lead to a resurgence of higher-income individuals making after-tax contributions to a 401(k) plan, after maxxing out available alternatives, for the sole purpose of preparing to complete a future tax-free Roth conversion of the contributions down the road?
If I remember correctly, isn't there another limit of like $52K for 401K? Anyone know where this comes in or if I'm just ?
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Old 11-10-2014, 08:05 AM   #22
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Originally Posted by RetireBy90 View Post
If I read the article correctly, it talks of contributing after you hit the $23K limit

If I remember correctly, isn't there another limit of like $52K for 401K? Anyone know where this comes in or if I'm just ?

You are referring to the Defined Contribution aka Section 415(c)(1)(A) limit.

For 2015 it has been increased to $53,000. In the case of my DW, the following components go into this limit.

- 401k - pre-tax employee contributions
- 401k - after-tax employee contributions
- company matching contributions
- employee DB pension contributions

I would suspect that Roth 401k employee contributions would also be included in the limit.

We have it setup to request the maximum percentage allowed by the company to be deducted. On every paystub it shows that the contributions were limited by law to be $xyz.ab in order to respect the $53,000 annual limit.

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Old 11-10-2014, 08:09 AM   #23
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from IRS at 401(k) Plans - Deferrals and matching when compensation exceeds the annual limit
Compensation and contribution limits are subject to annual cost-of-living adjustments. The annual limits are:
•salary deferrals - $17,500 in 2014 and $18,000 in 2015, plus $5,500 in 2014 and $6,000 in 2015 if the employee is age 50 or older (IRC Sections 402(g) and 414(v))
•annual compensation - $260,000 in 2014 and $265,000 in 2015 (IRC Section 401(a)(17))
•total employee and employer contributions (including forfeitures) - the lesser of 100% of an employee’s compensation or $52,000 for 2014 and $53,000 for 2015 (not including "catch-up" elective deferrals of $5,500 in 2014 and $6,000 in 2015 for employees age 50 or older) (IRC section 415(c))
The after browsing IRS site, I found a description of contributions at: Retirement Topics - Contributions
Types of employee contributions
•Salary reduction/ elective deferral contributions are pre-tax employee contributions that are a generally a percentage of the employee's compensation. Some plans permit the employee to contribute a specific dollar amount each pay period. 401(k), 403(b) or SIMPLE IRA plans may permit elective deferral contributions.

•Designated Roth contributions are a type of elective contribution that, unlike pre-tax elective contributions, are currently includible in gross income but tax-free when distributed. 401(k), 403(b) and governmental 457(b) plans can allow them. If a plan permits designated Roth contributions, it must also offer pre-tax elective deferral contributions.

•After-tax contributions are contributions from compensation (other than Roth contributions) that an employee must include in income on his or her tax return. If a plan allows after-tax contributions, they are not excluded from income and an employee cannot deduct them on his or her tax return.

•Catch-up contributions If permitted by a 401(k), 403(b), governmental 457(b), SARSEP or SIMPLE IRA plan, participants who are age 50 or over at the end of the calendar year can also make catch-up elective deferral contributions beyond the basic limit on elective deferrals.
Now put on your accountant hat and your IRS hat on top of that, I CAN read this to say that after-tax contributions are different than the deferral contributions. Note that in first quote, it describes limits on deferrals. So you could consider the 2 quotes above to say that you have only 23K you can defer, or postpone taxes on, and then another pool with max employer and employee contributions limited to $52K ( I read on IRS site somewhere between the 2 above).

Interesting option. I could do another $2K per month and use that as a big part of my living expenses for first couple years.
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Old 11-10-2014, 10:03 AM   #24
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I ran into this situation twice with a 457 plan (one of the gov. employee versions of a 401k). Generally same rules as a 401k or 403b plan. Was putting 2k per pay period starting Jan. of each year. Payroll took out too much at this rate and exceeded. The plan administrator caught the mistake, and sent me a check for the excess. Payroll refused to adjust the amount, so I had to declare the amount as income on Fed and State tax returns. A PITA.
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