<p>I don’t know where to ask this, but I figured parents would know this.</p>
<p>I’m looking at a company savings plan and it says if your income is above $100,000 the maximum you can save is 10% of the first $60,000 and 8% of the amount between $60,000 and $100,000 and nothing on the amount above $100,000 while the company will match nothing.</p>
<p>So say your income was above $100,000, does this mean you can save 0.10<em>60,000 + 0.08</em>40,000?</p>
<p>I’m just not sure what the “8% of the amount between $60,000 and $100,000” mean. Thanks for any help.</p>
<p>And the reason they do this is because the IRS has very specific nondiscrimination tests that the company must pass – meaning that they don’t want highly compensated employees (like, those earning > $100,000) to contribute lots more than nonhighly compensated employees. By restricting HCEs’ contributions this way, the company is assured that they will pass the tests.</p>
<p>Does the company match any of it?
Also…not sure what type of plan this is. Our company has a pretax plan but the ceiling of what is eligible pretax is lower than 40K. </p>
<p>2008 SIMPLE IRA Contribution Limits
Simple IRA
Standard Limit Catch-up Limit (Age 50 and older )
$10, 500 $13,000
Employers are generally required to match each employee’s salary reduction contributions, on a dollar-for-dollar basis, up to 3% of the employee’s compensation. </p>
<p>2008 401(k) and Solo(k) Contribution Limits
401(k) & Solo(k) Plans : Employee Salary Deferral Limits
Standard Limit Catch-up Limit (Age 50 and older)
$15,500 $20,500
Employer can contribute up to $29,500</p>
<p>VeryHappy, I agree that the rationale for limiting compensation to $100K is so the company passes the non-discrim tests. They have probably had repeated experiences with refunding deferrals back to highly compensated employees because the plan couldn’t pass ADP/ACP. Refunds are messy and annoy people, since it inevitably involves amending personal tax returns, etc.</p>
<p>Of course, a match would probably help plan participation across the board, but if the company isn’t in a financial position to do that…</p>
<p>Maximun contribution is lesser of 100% of compensation or $46,000 (2008 limits). For a 401(k), max employee contrib is $15,500, which makes max ER contribution $30,500. (There is an additional $5K catch-up for EEs>50 which also figures into the max contrib limit.) $46K limit is based on max elig compensation ($230,000 in 2008) times 25%.</p>