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Has anyone successfully negotiated more employer money into a 401k?

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  • Has anyone successfully negotiated more employer money into a 401k?

    Hi everyone, I work as a W2 employee and benefits around retirement appear to be standard for everyone. We do have a match for our 401k, but there is still a lot of space left (employer contribution) to fill that bucket up. Have you ever tried asking your employer if some benefits (ie productivity bonus, retention bonus, etc) be funneled through to that employer contribution space? Can this be done? I was wondering if this costs the company more or if this is cost neutral for them to do.
    Also our health system only restricts the people who can open a 457 to those who earn 400k or higher. I would not qualify. IS there a reason why it would be advantageous for them to do this? Or is it a valid question to ask to be included even if I earn significantly less than that?
    Appreciate what you think about this!

  • #2
    fwiw i asked this question on speakpipe, maybe wci will address on podcast?

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    • #3
      Additional employer contributions will have to meet non-discrimination rules and is often cost prohibitive for large organizations. Much more interest among highly compensated employees than others.
      Last edited by GasFIRE; 10-28-2021, 01:07 PM.

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      • #4
        Typically it is a match up to percentage, like 6%. The double limit, your contribution might be a front load on a paycheck, but they stop at 6% of your contribution.
        Thus you lose the match. Some will true up at the end of the year, some not.

        Not an expert on the non-discrimination rules. Maybe spiritrider will grace the thread with his comments. I don't think gross wages is the limiting factor, I think it is the dual match and max percentage per paycheck. Your SPD document would have the details. It may be intentional for the testing required for non-discrimination.

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        • #5
          The maximum safe harbor match is on 6% of compensation up to the compensation limit (2021 = $290K). A employer can also make non-elective employer contributions up to the annual addition limit. As has been pointed out these will be subject to non-discrimination and top heavy testing. HCE bonuses would most likely fail testing.

          Often a 457b as a secondary plan and many 401a plans are required to be only available to key personnel.

          Why would you think many employers would see maxing the annual addition limit for high income individuals the best use of their overall employee benefit dollars.

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          • #6
            My former group had a 401k/profit-sharing plan to enable the docs to use all available retirement space. Works OK for a top heavy organization like a group of anesthesiologists with a small billing staff. Doesn’t work as well for a clinic with a large ancillary staff.

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            • #7
              Originally posted by MPMD View Post
              fwiw i asked this question on speakpipe, maybe wci will address on podcast?
              I hope he discusses this soon! Thanks!

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              • #8
                • As I already pointed out, there are very strict anti-discrimination and top heavy restrictions on 401k plans. It is not easy for an employer to go beyond safe harbor requirements.
                • The easy facts and circumstances allowing high income professionals to max out their annual addition limit are when all W-2 employees are HCEs or are partners in a partners only group.
                • I have seen a specially designed 401k plan for professional partners that can allow partners to fund their own employer contributions up to the annual addition limit. I don't entirely understand how this works with W-2 non-HCEs and have only seen it used by Physician Groups.
                • The only cost effective way of possibly allowing W-2 high income individuals to maximize their annual addition limits is by amending the 401k plan to use the New Comparability method of profit sharing. Usually this would entail replacing an employer match with a minimum 5% profit sharing contribution. The New Comparability method allows establishing employee "groups". Each group can receive a different PS contribution rate. However, these contribution rates are are subject to testing, which may lower the higher contribution rates and/or raise the lower contribution rates.

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                • #9
                  Originally posted by spiritrider View Post
                  • As I already pointed out, there are very strict anti-discrimination and top heavy restrictions on 401k plans. It is not easy for an employer to go beyond safe harbor requirements.
                  • The easy facts and circumstances allowing high income professionals to max out their annual addition limit are when all W-2 employees are HCEs or are partners in a partners only group.
                  • I have seen a specially designed 401k plan for professional partners that can allow partners to fund their own employer contributions up to the annual addition limit. I don't entirely understand how this works with W-2 non-HCEs and have only seen it used by Physician Groups.
                  • The only cost effective way of possibly allowing W-2 high income individuals to maximize their annual addition limits is by amending the 401k plan to use the New Comparability method of profit sharing. Usually this would entail replacing an employer match with a minimum 5% profit sharing contribution. The New Comparability method allows establishing employee "groups". Each group can receive a different PS contribution rate. However, these contribution rates are are subject to testing, which may lower the higher contribution rates and/or raise the lower contribution rates.
                  I infer these rules do not apply to 403b plans? At my work we match 10.5 percent for all employees, which exceeds the safe harbor. The highly compensated top out because of the annual addition limit (the 5x $290 one, not the $58k one), but we provide an investment only variable annuity for employer contributions over the limit to bring the match to 10.5% regardless.

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                  • #10
                    I'm not sure what you are referring to.

                    The defined contribution (DC) annual addition limit (2021 = $58K) is always exactly 5X the compensation limit (2021 = $290K) and applies to 403b plans. A way around this is to send employer contributions to a 401a plan, because a 403b is not aggregated with other plans of the employer for annual addition purposes.

                    However, in relation to what we are talking about in this thread. Anti-discrimination requirements do not generally apply to 401a, 403b and 457b plans. Congress often exempts governments from laws and regulations that apply to commercial businesses. "Do as I say, not as I do."

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                    • #11
                      Originally posted by spiritrider View Post
                      I'm not sure what you are referring to.

                      The defined contribution (DC) annual addition limit (2021 = $58K) is always exactly 5X the compensation limit (2021 = $290K) and applies to 403b plans. A way around this is to send employer contributions to a 401a plan, because a 403b is not aggregated with other plans of the employer for annual addition purposes.

                      However, in relation to what we are talking about in this thread. Anti-discrimination requirements do not generally apply to 401a, 403b and 457b plans. Congress often exempts governments and tax-exempt organizations from laws and regulations that apply to commercial businesses. "Do as I say, not as I do."
                      You answered the question in the second paragraph. As for the limits, I see I phrased it poorly, but even there I see from your answer why we use a 401a for the employer contributions.

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                      • #12
                        Originally posted by spiritrider View Post
                        • As I already pointed out, there are very strict anti-discrimination and top heavy restrictions on 401k plans. It is not easy for an employer to go beyond safe harbor requirements.
                        • The easy facts and circumstances allowing high income professionals to max out their annual addition limit are when all W-2 employees are HCEs or are partners in a partners only group.
                        • I have seen a specially designed 401k plan for professional partners that can allow partners to fund their own employer contributions up to the annual addition limit. I don't entirely understand how this works with W-2 non-HCEs and have only seen it used by Physician Groups.
                        • The only cost effective way of possibly allowing W-2 high income individuals to maximize their annual addition limits is by amending the 401k plan to use the New Comparability method of profit sharing. Usually this would entail replacing an employer match with a minimum 5% profit sharing contribution. The New Comparability method allows establishing employee "groups". Each group can receive a different PS contribution rate. However, these contribution rates are are subject to testing, which may lower the higher contribution rates and/or raise the lower contribution rates.
                        Thank you, this is very enlightening!

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