Adoption Agreement Limits Roth to 50% of Comp

[roundlou]

Why would an adoption agreement limit roth contributions to 50% of compensation?

[Peter Gulia]

Does that adoption agreement also limit non-Roth elective deferrals to 50% of compensation?

[cathyw]

I'm guessing because the Roth contribution is after-tax.  You need enough left over after the deferral to cover FICA, Medicare, Federal withholding and State withholding.

[Peter Gulia]

If a plan sponsor’s reason for a limit on either kind of elective deferrals is increasing the likelihood (not assuring) that a paycheck will have enough money to support not only tax withholding but also retirement, health, other welfare, and fringe benefits, one might consider this 2008 BenefitsLink discussion.

https://benefitslink.com/boards/index.php?/topic/38395-401k-elective-deferral-hierarchy/

[Peter Gulia]

And a 2022 conversation.

https://benefitslink.com/boards/index.php?/topic/69466-gross-pay-insufficient-to-deduct-401k-deferrals/