2023 retirement contribution--help me figure this out

[Knee Deep in Water Chloe]

Okay, stay with me. I'm trying to figure out two monetary numbers and the answer to two questions, 
1) How much did DH contribute to his 403B in 2023, and is that over the allowed amount? (which of course means we'd be strung up in town square)
2) Payroll forgot to turn DH's elective contributions back on for 2024. I was swimming the the sea of depression and just figured this out with April's paycheck. How much do we need to have as an elective contribution for the remaining of 2024? 




For 
1) How much did DH contribute to his 403B in 2023, and is that over the allowed amount? (which of course means we'd be strung up in town square)

For 2023, a US human could contribute $22,500 toward their 403B. If they were over the age of 50, they could contribute another $7,500. That total is $30,000. Sub question: does this include employer contributions or is it just employee contributions?

Here's what DH's paychecks stubs show: 
$2250 / month elective contribution (this would have been $27,000 for the year if every contribution had been made)
$1000 /month employer contribution (this would have been $12000 for the year if every contribution had bee made)

That would total $39,000. 

$39,000 > $30000. 


Toward the end of October, the payroll clerk figured out DH was over his allowable contributions. 

From what I can tell on the paystubs, 
DH's employer contributions went all 12 months, which would indicate $12000. 
The October elected contribution was taken out and then a week later we were given a $2250 check.
There were no November nor December elected contributions. 

By my count, that would mean: 
$2250 x 9 months =$20,250 
$1000 x 12 months = $12,000
That total is $32,250. 
For 2023, either we're still over $2250, or DH was not allowed to contribute $9,750. 


Thoughts?

[Knee Deep in Water Chloe]

2) Payroll forgot to turn DH's elective contributions back on for 2024. I was swimming the the sea of depression and just figured this out with April's paycheck. How much do we need to have as an elective contribution for the remaining of 2024?

For 2024, DH can contribute $30,500. 
The employer has contributed $1,000 per month through April. 
No other retirement contribution is listed on his 2024 paystubs. 

Sub question: does this include employer contributions or is it just employee contributions?


Beginning with the May paycheck, the elective contributions will resume. 
That's 8 paychecks. 
$30,500 / 8 = $3812.5 out of each check for the remainder of the year IF the employer contribution DOES NOT count toward the maximum. 

However, if the employer contribution contributes to the maximum of $30,500, then 
$30,500-12,000= $18,500 / 8 = $2312.5


Thoughts?

[minnesotapaintlady]

The max with employer contributions is more like 66K or something like that.  He is fine for 2023 with only 27K of employee contributions.

This part I don't understand.  Unless it's a safe harbor situation where he is being limited by being an HCE (highly compensated individual), he was not over the limits.

Toward the end of October, the payroll clerk figured out DH was over his allowable contributions.

From what I can tell on the paystubs,
DH's employer contributions went all 12 months, which would indicate $12000.
The October elected contribution was taken out and then a week later we were given a $2250 check.
There were no November nor December elected contributions.

By my count, that would mean:
$2250 x 9 months =$20,250
$1000 x 12 months = $12,000
That total is $32,250.
For 2023, either we're still over $2250, or DH was not allowed to contribute $9,750.

[minnesotapaintlady]

May 2, 2024 15:49:42 GMT -5 Knee Deep in Water Chloe said:

2) Payroll forgot to turn DH's elective contributions back on for 2024. I was swimming the the sea of depression and just figured this out with April's paycheck. How much do we need to have as an elective contribution for the remaining of 2024?

For 2024, DH can contribute $30,500. 
The employer has contributed $1,000 per month through April. 
No other retirement contribution is listed on his 2024 paystubs. 

Sub question: does this include employer contributions or is it just employee contributions?


Beginning with the May paycheck, the elective contributions will resume. 
That's 8 paychecks. 
$30,500 / 8 = $3812.5 out of each check for the remainder of the year IF the employer contribution DOES NOT count toward the maximum. 

However, if the employer contribution contributes to the maximum of $30,500, then 
$30,500-12,000= $18,500 / 8 = $2312.5


Thoughts?

Limit for 2024 with employer contributions is 69K

www.fidelity.com/learning-center/smart-money/403b-contribution-limits

[haapai]

I don't think that you guys are in trouble.   It appears that your husband has not over-contributed to his 403(b) because employer contributions are usually moot or have at least have to be much larger to cause problems. 

Logging onto the records of the 403(b) account administrator may give you some confidence that your husband has not over-contributed.  That is, look at the contributions record provided by the 403(b) account instead of the pay stubs and w-2s. 

 As for your employer shutting down your husband's contributions in October 2023 and failing to reset them with the new year, well, that's both a pretty simple math problem and a big hairy mess.  First you have to raise heck with payroll/HR and get contributions started again.  Then you have to figure out exactly when the resumption in contributions will take place or has taken place.  And then there's the issue of matching contributions that have not been made.  You might get these matches back at the end of 2024, but the delay in having them deposited and earning can be painful.

There is some possibility that when your husband got word that he had contributed too much, he reduced his contributions to zero.  In that case, HR and payroll might just be blameless.

[bookkeeper]

Was he the highest paid person at his workplace?  Highly compensated individual rules may come into play.  The rules did for my DH at his workplace of 18 people.  He was very careful with the way his compensation package was arranged because of the IRS rules about earning several times more than the other employees in your workplace.  He worked for a subdivision of state government, so he was able to defer compensation until his retirement to help lower his income during working years.  

[azucena]

Chloe - looks like mpl answered your math questions but if not, tag me back in pls and I'll look when I'm on my laptop with excel always open

Agree with the max listed for him vs him+employer.

Also agree that he needs to ask if HCE is coming into play.

If they messed up 2024 election, find out if they do 401k match true up at yearend. At least then he will get full entitled match. Just might not be as valuable short term depending on stock market.

[azucena]

And give yourself grace, depression brain fog is a bitch. If i hadn't already recognized that in myself, dd11 not being able to even answer frickin multiple choice soc studies wkst questions that are only 10 a page and straight from reading text would have convinced me. She's very gifted and was like mama why can't I do this any more. Um, your brain, body and soul are all trying to heal from school trauma. It's been a month and she's able to do 30 mins of hw twice a day. Science still requires a lot of me pointing to text answers. And we are just saying eff it to any critical thinking essay questions. Math is finally clicking again.

Need to pep talk myself about grace bc I'm at the point where she is out of crisis and now I'm so mad at myself about not getting her out of there sooner.

Sorry if this seems all about me in your thread. Really meant to give you her example to help you see yourself but then it turned cathartic for me. My apologies.

[Knee Deep in Water Chloe]

May 2, 2024 19:08:38 GMT -5 bookkeeper said:

Was he the highest paid person at his workplace?  Highly compensated individual rules may come into play.  The rules did for my DH at his workplace of 18 people.  He was very careful with the way his compensation package was arranged because of the IRS rules about earning several times more than the other employees in your workplace.  He worked for a subdivision of state government, so he was able to defer compensation until his retirement to help lower his income during working years.  

Yes, that is at play here. Hmmm...I'll have to ask about that. 

[haapai]

Dang!  I was hoping that you wouldn't tell me that he was an HCE.  That's not something that I have much experience with.  I can only offer you these two breadcrumbs.  1.) Do employers do tests in October-ish to determine whether 403 (b) plans are top-heavy?  2.) Would the employer contribution (which continued) have affected this calculation in any way? 

I was under the belief that tests for top-heaviness would occur at the end of the year.  I haven't tried to confirm this and don't really know how to do that.  Maybe MPL will show up again and hit this one out of the park. 

Is your husband paid monthly or twice a month?  That might really simplify the calculations required to figure out how much to contribute going forward. 

Is any of the employer contribution in the form of a match or is the $1000 a month of employer contributions independent of his own contributions? 

Is your husband over 50?  If so, especially if he only recently turned 50 or had to fiddle with his contributions recently, how exactly did he ask for his contributions to be taken?  Sometimes when you're eligible for a catch-up contribution, you have to be careful how you specify that.  If you don't specify that a certain amount be taken as a catch-up contribution, you can get cut off early. 

[haapai]

I'm sorry for being so cryptic and skipping a lot of transitions, but a quick google search of 2023 contribution limits and catch up contribution limits yields some very suggestive numbers.  I'm really thinking that your husband tried to have the entire 403(b) contribution that he was eligible to make himself ($22,500 in regular employee contributions and $7,500 in catch-up contributions) taken as regular 403(b) contributions and none of it as catch-up 403(b) contributions.  That would have led to him being cut off once he hit the limit for everyone.  $22,500.

[bean29]

You can do the Non-discrimination tests any time before the end of plan year, but generally you should do them early enough to allow for correction of any plan failures.

If Chloe's husband contributed too much, I think the IRS would have allowed him to withdraw that overpayment before 4/15/24 but I don't know for sure, at any rate, it is too late for that.

[The Walk of the Penguin Mich]

May 3, 2024 11:29:27 GMT -5 Knee Deep in Water Chloe said:

May 2, 2024 19:08:38 GMT -5 bookkeeper said:

Was he the highest paid person at his workplace?  Highly compensated individual rules may come into play.  The rules did for my DH at his workplace of 18 people.  He was very careful with the way his compensation package was arranged because of the IRS rules about earning several times more than the other employees in your workplace.  He worked for a subdivision of state government, so he was able to defer compensation until his retirement to help lower his income during working years.  

Yes, that is at play here. Hmmm...I'll have to ask about that. 

Highly compensated employees depends on the number of employees and is a formula that has a few moving parts but d said that it changed yearly for him.  Some years he got a refund back, some years not.

[bean29]

So, if they did a correction for a non-discrimination failure, and then the plan "passed" after they did the corrections, you should be good to go.  The necessary reports were filed for the Plan Sponsor to create the Tax Filing, and II was told by our Accounting Firm that the IRS does not really audit the reports.  So, unless someone from his company brought it up, or the IRS is asking questions, I would just leave well enough alone.  Our corporate plan is a 401k not a 403 (b), and I do not know how the reporting is different, so idk what to say.  Do you have a tax advisor completing your tax return?

[haapai]

If you ever find a definitive answer regarding what happened and want to update us, I'd be interested. 

If your husband's contributions got cut off in 2023 because he was classified as an HCE and the plan got top-heavy, that might happen again in 2024. 

It might even happen earlier in 2024 than in 2023.  Your husband probably wasn't the only person who was barred from making contributions in the last quarter.  Some of those other folks that weren't able to make contributions in the last quarter might take the tactic of front-loading their contributions in 2024 in anticipation of not being able to make contributions after September.  That is, they'll be dividing the amount that they can contribute annually by nine instead of twelve.  This could definitely cause the plan to fail non-discrimination tests even earlier in 2024 than in 2023. 

It might be a good idea to count on your husband being unable to make contributions for several months at the end of this year.  Have an alternative investment or use for the extra money sussed out and ready to employ. 

ETA:  I am really hoping that your husband's contributions got cut off because he ignored the catch-up contributions box and not because he's an HCE.  The first problem is pretty easy to understand and fix.  The second is pretty much a version of prisoner's dilemma. 

[bean29]

May 8, 2024 19:33:43 GMT -5 haapai said:

If you ever find a definitive answer regarding what happened and want to update us, I'd be interested. 

If your husband's contributions got cut off in 2023 because he was classified as an HCE and the plan got top-heavy, that might happen again in 2024. 

It might even happen earlier in 2024 than in 2023.  Your husband probably wasn't the only person who was barred from making contributions in the last quarter.  Some of those other folks that weren't able to make contributions in the last quarter might take the tactic of front-loading their contributions in 2024 in anticipation of not being able to make contributions after September.  That is, they'll be dividing the amount that they can contribute annually by nine instead of twelve.  This could definitely cause the plan to fail non-discrimination tests even earlier in 2024 than in 2023. 

It might be a good idea to count on your husband being unable to make contributions for several months at the end of this year.  Have an alternative investment or use for the extra money sussed out and ready to employ. 

ETA:  I am really hoping that your husband's contributions got cut off because he ignored the catch-up contributions box and not because he's an HCE.  The first problem is pretty easy to understand and fix.  The second is pretty much a version of prisoner's dilemma. 

That is not how the tests work. I have some info in my desk at work, I will t remember to pull it out next week.

[haapai]

I think that you are right.  I've been looking up the requirements for non-discrimination testing for 403(b) plans and it appears that some of them require ACP testing but not ADP testing (top-heavy testing) and that many of them are exempt even from ACP testing.  A lot of the articles that I am finding are very dated and all of them are dense with acronyms that I do not understand. 

It's so mind-numbing that I'm leaning hard into the hope that Chloe's hubby was "cut off" for reasons that had nothing to do with him being an HCE. 

So far, I have found absolutely no indication of when 403(b) plan administrators actually test the plan except that it must be done annually.  If you have an explanation of why it was being done in October, that would be enlightening.  I'm thinking that this might have been the end of the year for governmental entities, but that is only a bread crumb.  

Earlier discussions on this board of HCEs having their elective contributions returned have left me with the impression that there isn't a whole lot of rhyme or reason or "fairness" in whose contributions get returned.  I'm not sure if this only applies to 401(k) plans, which are subject to more tests and might have to cure several failures at once or if it is also is true when 403(b) plans subject to some non-discrimination testing fail the much more limited testing that they must do.