JimW58

Quick update: My wife has taken this to the company HR dept (along with a copy of the plan summary that shows that catch up contributions are allowed in their plan), who in turn has taken it to the 401K plan administrator. The 401K plan admin has realized (thanks to our efforts), that there is a deficit in the way the plan is being implemented. He did mention perhaps raising the 15% percent limit so all employees would be able to reach the 18K annual max or simply allowing the 6K in catch up contributions as remedies. As of this posting nothing has been done but hopefully we will hear something soon. The woman in HR did mention to my wife that no one has ever questioned the current plan or wanted to make catch up contributions in the past, which we found hard to believe. At least the ball appears to be rolling in our favor. Thanks to everyone for your input and help with this situation. I will update again when warranted.

I hopefully won't need to go any further than their own plan summary. The wording is in there, they're simply not implementing it properly. Thank You!

It is very common. So much time and money are wasted attempting to fix their mistakes, not to mention the stress one endures through something like this. The 15% cap is across the board. My wife is not an HCE at her company, if she was and was able to satisfy the 18K deferral limit with just 15% of her pay, this problem wouldn't exist. The incorrect way they are implementing the plan is discriminatory to the non HCE's and prevents the non HCE's from contributing an equal amount in make up contributions.

Thanks Bird! And you're right about the final authority attitude from the folks at ADP, they basically told me and my wife that we were wrong and to go pound sand. I am finding more and more as I grow older just how many people have no clue about what they are doing. It amazes me how some people even manage to get out of bed in the morning.

Okay, thanks for the clarification. What's really puzzling to me and other people I've spoken to about this is why would the employer ever cap the deferral amount in the first place? They only match up to 6%, so how do they benefit from a 15% cap?

The part of your original post I was referring to was that an employer can cap deferrals and also not permit catch up contributions. I don't believe that is legal. Everything I've read and what's been posted here is that once they cap deferrals at an amount below the legal limit of 18K, they have to allow catch up contributions after the cap is reached. To not allow the catch up contributions for someone that cannot reach the 18K with the 15% cap in place is discriminatory. We are going to take this to the company plan administrator asap. Thanks for your help.

That's exactly what I said to the people running the plan, but they insist otherwise. The way they have it set up is a catch 22 situation, she's screwed either way. The company that runs the 401K for my wife's company is ADP, both my wife and myself have had a number of heated phone calls with them and gotten nowhere. I guess our next step is to deal with her company directly, that's what ADP suggested as well, but I wanted to make sure we were right before we initiated any conversation with them.

Thanks Kevin. Can you provide a link for the statute you posted please?

Here is the part of the plan summary that explains the deferral and catch up contributions.

Yes I agree that it should. It states right in their plan summary under Catch Up Contributions that "additional amounts may be deferred REGARDLESS of any other limitations on the amount that you may defer to the plan". To me the word regardless is the key here, because the way I read it is that it negates the 15% cap as far as catch up contributions are concerned. But they insist that my wife must reach the 18K max deferral limit before she can make any catch up contributions. And there is no way she can reach that limit with a 15% cap. It seems pretty ridiculous to me.

Belgerath, This seems to fly in the face of everything I've read on the IRS website and is also completely different from the way my employer conducts their 401K program and any other 401K program I have seen. I would think that an employer would at the very least need to meet the requirements laid out on the IRS website which is 18K max deferrals and 6K catch up contributions. I don't see anything on the IRS site that says they can do either of these things. Can you link me to something that reinforces what you wrote?

Tom & NJ Mike, that's what I was led to believe as well. If they're going to cap the dollar amount of deferrals, the least they could do is allow make up contributions.

Hi All, My wife's employer caps her 401K deferrals at 15% of her salary. She gives the 15% max but it isn’t enough to reach the $18,000 max for annual deferrals. She is over 50 but also not allowed to make “catch up contributions” due to the fact that she hasn’t reached the $18,000 limit. She wants to put more money into her 401K but cannot do so due to these restrictions. It seems these restrictions are extremely unfair to those employees who cannot max out the $18,000 deferral limit with a strict 15% cap on deferrals. Are these restrictions allowed by law? Shouldn’t she be able to contribute more? It seems completely unfair to restrict her deferrals in this manner.