inquirer wrote:

- quote -

Be a greater than 5% owner, either directly or by attribution. For
instance, if my CPA firm hired my wife, at minimum wage, to work in
our office, she would be a highly compensated employee for purposes
of any qualified plan our firm maintained.

--
Ed Zollars, CPA
Phoenix, Arizona

"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote in message news:<cg0m4n11cjj[at]news3.newsguy.com> ...
- quote -

Ed, Could you possibly explain how someone making minimum wage could
be considered "highly compensated"? I am not doubting you but I am
very curious how that would work.

Inquirer

- quote -

Yes this is all I make per year.... 30k

noreplysoccer[at]hotmail.com (Jim) writes:
- quote -

There are rules like that for the SIMPLE IRA.

- quote -


In addition to the employees' salary reduction contributions, you
generally required to match each s salary reduction contribution on
a dollar-for-dollar basis up to 3% of the s compensation. Instead
of the matching contribution, you may choose to make nonelective
contributions of 2% of the s compensation


For the 401k, the rules are more complicated. There are
requirements that "highly compensated" folks aren't the
only ones who benefit from it, and there are provisions
which let companies protect themselves from those
requirements by doing things like matches.




--
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me6[at]privacy.net writes:

- quote -

That's unfortunate. During the downturn, several
major employers cut or reduced their matches, but
AFAIK, several have brought them back since, too.

- quote -

50% of the first 6% that the employee contributes, with
the match going in paycheck by paycheck (as opposed to
a former employer which made the match payment at the
end of the year as a single payment).

- quote -

There are several reasons:
1. much higher limits on the amount that you may contribute.
2. potentially better protection for the $$ against lawsuits
or other claims (depends on the state)
3. access to certain types of investments which are
otherwise hard to get at (ie. stable value funds)
4. earlier access to it at retirement (probably not really
important)

Hrm. That's off the top of my head. There are probably
others.

Frankly, if you can manage it, max out both the 401k _and_
the Roth (or traditional IRA if your income's above the
Roth limits).

--
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me6[at]privacy.net wrote:

- quote -

Do the Roth because you have better investment alternatives.

--
Ron

- quote -

That's basically what happened to me. We got bought
out by a much bigger company...which then fell on hard
times...and now there is no match at all on my 401k

Hence the question of if it is better for me to just
quit the 401k and go on my own with a Roth.

And yes i do now one can put more into a 410k.... but
that's really not an advantage to me since Im lucky to
put 2k in anything each year.

me6[at]privacy.net writes:

- quote -

As mentioned elsewhere, lots of small employers are now
offering non-matching 401ks. But the percentage of
employers offering a match is different from the
percentage of employees who get them because matches
are more common at large employers.

- quote -

If you can only afford either the 401k _or_ the Roth,
it sounds like, lacking the match, you might be better
off putting your future contributions into the Roth.
Leave the 401k money where it is (you probably don't
have much of a choice about that) and, eventually,
when you change jobs, roll it over to a regular IRA
(and maybe, again depending on various things, then
roll that IRA to a Roth IRA).

But really - if you can - max out that Roth and _still_
put some more into that 401k. The max you can put into
a Roth is only $3000/yr. Unless you're only making $30k/yr,
that's less than 10% of your income. $3000/yr is great -
better, probably, than most folks are saving - but it's
not a hell of a lot when you are looking at living off
that money in the future.

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I worked for a small tech company for about 17 years (I'm a loyal guy).
When I started, they matched 2 to 1 for the first 2% of contributions. I
think the owner did this to give the maximum help to those who could only
afford to contribute a small percentage of their salary. Several years
later, it was increased to match 2 to 1 for the first 3%.

Then we were acquired by another company in 2002 and the new company (my
current employer) does not match their 401K at all - bummer. Our salaries
were adjusted upward to compensate for the loss of this however.



<me6[at]privacy.net> wrote in message
news:qcj4i0pje5e33nnr3tep8lalnig5qnd8qa[at]4ax.com...
- quote -

Jim wrote:

- quote -

No, they don't have to do either. However, if they provide a "safe
harbor" match or contribution (which appears to be what you are
referring to), then it eliminates the testing that is otherwise
required to determine the limits on what the "highly compensated"
may contribute (highly compensated is a technical term in the plan
arena, and it's possible for someone to be earning minimum wage and
be highly compensated for plan testing purposes <grin> ).

--
Ed Zollars, CPA
Phoenix, Arizona

me6[at]privacy.net wrote:

- quote -

Technically it depends on the plan document itself, but generally
there must be a qualifying event to trigger a distribution. And
Congress a couple of years ago removed the ability to roll over a
"hardship" distribution from the plan.

Note that it's not necessarily *required* that the plan permit a
rollover at termination, though most do. A plan can provide that
distributions will not be made until the retirement date provided in
the plan.

What I suggest you first do is consult the summary plan description
you should have received to see what the triggering events are. If
that isn't clear, you can request a copy of the plan document
itself, though that's likely to be fairly dense reading material.

--
Ed Zollars, CPA
Phoenix, Arizona

- quote -

OOOOPs!

yes it was Wells Fargo....and NOT Caldwell Banker. My
mistake!!

me6[at]privacy.net wrote:

- quote -

Not that it makes much difference but Strong funds were acquired by
Wells Fargo. Strong has about 50 of their own funds, but it could be
that many of them are not offered in your 401k plan. They also offer
funds from different fund families, but again they may not make them
available in your 401k.

- quote -

You can probably best answer that question by setting up a spreadsheet
that allows you to compare the options, based on the amounts you are
allowed to contribute, estimates of returns, tax effects, etc. This
will allow you to do some "what if's" and see the impacts of your
contribution and taxes on cash flow on your current and future income
stream.
--
Richard McBane

noreplysoccer[at]hotmail.com (Jim) writes:

- quote -

I don't believe so.

I have personally worked at 3 companies that do
neither. My wife has worked a 4 companies that
do neither. Most of my friends work at companies
that do neither.

I'm willing to believe that if that many different
companies do neither, they're not all breaking the
law and therefore that your information is inaccurate.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

In article <b7cb2d49.0408180554.609431ed[at]posting.google.com> , Jim
<noreplysoccer[at]hotmail.com> wrote:

- quote -

In the past 20 years, I have been in at least 8 different 401K
plans at various employers. Only one had any kind of match. Even
that didn't work out all that great since only 21% of the staff
used the 401K, the highly compensated rule kicked in, and I could
only put away 4% rather than the plan limit of 15%. At the same
time, I was over the limits for the Roth and traditional IRA, so
all of my qualified options were limited that year.

SEP plans have some type of rule where if the business owner
contributes, they must also contribute to the Employee's SEP
account. Perhaps that is what the poster is thinking of.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

- quote -

Interesting. I would have thought that NOT matching was
in the minority.

- quote -

Understand all points above. BUT our 401k does not
offer much to chose from.

Im just wondering if I STOPPED contributing to
it....... let it set and "churn".....and then start
taking that money and dumping to my own IRA where I
have more choices and maybe lower admin fess...if that
wouldn't be better for me?

- quote -

Yes..... the above is what Im "thinking" of doing.

But I cant do BOTH. I could contribute to my
Roth.....and just leave my 401k alone and do NOT put
more into it, correct?

- quote -

Question..... am i required to QUIT my job to rollover
my current 401k to and IRA? Or can i do it while Im
still working here anyway?

- quote -

Bingo!! That's my question exactly! That a good
index fund might beat my 401k

My 401k funds are managed by Strong funds.....which
just got "acquired" by Caldwell Banker. Strong didn't
have much of a choice of funds if I remember right.
Will get back with more info on that

But... with my own Roth IRA I could just deposit money
in a good LOW COST index fund. No? Maybe beat what
Strong has to offer

BTW....Im single.... 46..... and no kids.

"John A. Weeks III" <john[at]johnweeks.com> wrote in message news:<170820042016497500%john[at]johnweeks.com> ...
- quote -

must do one of two things if they have a 401k-

1) provide a MATCH
OR
2) contribute a guaranteed % of all employees pay to 401k, regardless
if employee contributes. (This would imply if employee contrbutes
nothing, employer is required to contribute something like 2%).

is this accurate?

"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote in message
newso76i09k6msck9ejf3t8d7firbdu7l7mfb[at]4ax.com...
- quote -

Of course it's pretty hard to predict what Congress might do. I think
conjecturing about a national sales tax may be easier than predicting some
of the other things they might do. It seems pretty hard to believe a sales
tax would actually replace the income tax, though. If I were pressed to make
a prediction, I would think some combination of the two taxes might be in
our future. If that means that income tax rates continue to come down, then
a Roth is less attractive, but I think the hardest part would be to predict
how far in the future.

Elizabeth Richardson