Reply to Only 1 week notice they're cutting 401k match in half

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[quote=Anonymous]My company has a great match, but there is one quirk that makes be livid, and it has to do this with this wacky IRS rule about "highly compensated employees."

Maybe the PP who does this for work can comment on this?

First, an HCE is defined by IRS.   You'd think HCE might equal 200K or 300K.  Oh no, of course not!  It's actually only around 115K.  So at our company, if you are an HCE, you aren't allowed to contribute the IRS max to the 401K (think the max now is 16500).  Instead, you are only allowed to contribute 10% of your salary.  So when I made 90K, I could actually contribute more than I can now.  Ridiculous.

So if you make about 120K as I do, you can only contribute 12K, instead of the IRS max of 16,5000.  That means there's 4500 left on the table that I COULD be contributing but they won't let me.  That makes me so mad, and over a career, that's hundreds of thousands of dollars in contributions and growth.

Why is this!?!?!  Our plan has a match regardless of what you contribute.  If you contribute 0, you still get the match.  I have researched this a little, but it is complicated and I don't  understand all of the details.

Am I right that if our company structured the plan differently, we would be able to contribute up to the IRS max even if we are HCEs?  There's no way this would fly at a law firm where most make well over the HCE limit so I've got to think there's a way to fix this, but it would probably cost them more.  And I don't get why they do it at our company (large consulting firm) where a lot of folks are HCEs.  Any thoughts?[/quote]

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