1. Home
  2. Financial Planning
  3. 401k contribution limit

401k contribution limit

I got a letter from previous employer's 401k plan administrator indicating the following.

1) I was considered an HCE for tax year 2004 because I have earned
90,000 in the previous year 2003.

Is this correct given the fact that I worked only three months in year

2004. I haven't contributed anything to 401k during 2003 since I was eligible only after 6 months. 2) I contributed $3200 for the year 2004 from Jan thru March.(left compacy end of March) 3) Plan administrator said they will return $2700 (a major portion of my 401k contribution)

My question is that is right to consider me as a HCE given the fact that I worked with this firm only 3 months during 2004. Also I did not contribute to 401k in prior year 2003.

Thanks for any help.

Reply to
bins
Loading thread data ...

What you should do is roll the amount out of the plan.

The company failed one of the tests for discrimination and it effects people in the plan for that year. If people with lower compensation don't participate, the DOL sees it as a plan for the HCE and makes the plan lower their contribution based on a formula to get it in line with non-highly comp.

Since you are still in the plan you are counted as a participant. A good reason to never leave 401k money behind.

Reply to
BMS

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.