"Don" <dsarvas[at]yahoo.com> wrote in message
news:45cdf5f4.237468[at]news.west.cox.net...
- quote -

That's the way I read it as well. Where "equal" meant same dollar amount.

"Most notably, an employer that offers catch-up contributions must make them
available to all employees in all of its 401(k) plans who otherwise
qualify." Implication - offering catch-up contributions is optional.
(Followed immediately by a section entitled: "Why Should an Employer Offer
Catch-Up Contributions", where "because it is legally required" isn't listed
as a reason :-)

"This [universal availability] rule requires that all catch-up eligible
participants be provided with the same 'effective opportunity' to make the
SAME DOLLAR AMOUNT of catch-up contributions." Emphasis added.

Mark Freeland
BnetOnewsX[at]sbcglobal.net

On Sat, 10 Feb 2007 09:25:14 -0600, joetaxpayer
<joetaxpayer[at]nospam.com> wrote:

- quote -

I read it as being optional, that an employer is not required to
implement a catch-up policy. It was little cloudy in parts, but
that's how I see it from that link. However, if the employer chooses
to allow the catch-up then there is some "risk" that the universal
availablity rule may come back to bite them unless they make
provisions to make the program equal for all employees.

Don

Mark Freeland wrote:

- quote -

I read the PDF you linked to. The wording sounded pretty strong to me.
It seems to me that a plan not allowing the catch-up may be violating
the "universal availability rule". That the catch-up really isn't optional?

JOE

"Don" <dsarvas[at]yahoo.com> wrote in message
news:45cc9c33.5447406[at]news.west.cox.net...

- quote -

If a plan offers a catch up provision, it must allow all eligible employees
(age 50+) to add the same amount, and this catch-up contribution is
completely separate from the other contributions in terms of limits, HCE
testing, etc. But ... the plan is not required to have a catch-up
provision.

So, if the plan did allow catch-ups, you were improperly excluded; if it did
not, then you, and everyone else in the plan over age 50, were out of luck.

Here's a short (4 p.) article on the IRS Final Regulations (effective Jan
2004) on catch up provisions, that includes a discussion of the situation
you're describing - where you max out the percentage allowedby the plan; it
says that you can still make catch-up contributions (assuming they're in the
plan):
http://www.brownrudnick.com/nr/pdf/a...ions_12-03.pdf

Mark Freeland
BnetOnewsX[at]sbcglobal.net

jIM wrote:
- quote -

I'll keep am open mind, jIM, but this appears counter intuitive to me.
Much of the value of the 401(k) or deductible IRA has to do with pre-tax
money going in from one tax bracket, but coming out at a lower rate.
Counting on that to occur is less certain over time, i.e. I know my rate
now, and anyone's rate is knowable. As we've agreed here, we don't know
what rate any of us will be in at retirement, with the exception of one
poster's son who is aiming for the zero bracket.
But if I were retiring this year, 2007, I would be able to max out my
401(k) with $20,500 at my rate, and withdraw it next year at 0 and 10%.
That would be a good thing. And RMDs are not a concern until 70-1/2,
anyway. As with the debate over "pay mortgage before retirement?" (with
an answer of yes, unless you are an 'abundant' and disciplined) this mat
very well result in analysis yielding two or three slices of population,
one of which should, and one which should not, oversave in the final days.

JOE

In 2001, the limit was 15% or the max fixed amount -- whichever was
lower. In 2002, the law was changed so the % limit was removed and
only the fixed amount applied. However, a plan can opt to have an even
lower limit.


On Feb 9, 9:38 am, dsar...[at]yahoo.com (Don) wrote:
- quote -

On Feb 9, 12:38 pm, dsar...[at]yahoo.com (Don) wrote:
- quote -

I recently read that contributing more to a 401k closer to retirement
might not be the "best" strategy. Compounding has less impact on
savings. Increases RMD's. I think those were the two main points.

I see the advantage of the tax deduction (contributing more). But
there could be a good case the money is best placed in a taxable
account at ages when catch up contributions are allowed.

If I find a link, I'll reply and post it.

Don wrote:

- quote -

I believe (read that, I am making a few assumptions, you'll see why)
that each company has the right to make certain max limits in order to
avoid 'top heavy' imbalances.

I work for a company whose max limit is 30% (so a $50K employee can max
out the $15,000 deposit). The company allows the extra $5K for 50+
employees to come out at the same time, i.e. the 50K employee can have
60% taken out, 30% regular, 30% to the extra 5K. When the catch-up 5K is
done, the withdrawal automatically goes back down to 30%.
I don't know of any rule that forces the employer to allow the double
deduction, and am guessing that for your company, they chose not to
allow it. I hope my counter example helped a bit.

JOE

It sounds as if you were lead astray. There are contribution limits
($15,500 or 100% of comp for 2007) and there are catch-up contribs.
Catch-up contribs are currently $5000. $20,500 can be deferred in 2007
if you are 50 or older and you earned at least that much in
compensation. If you earned $17,500 (for example) your catch up would
be limited to $2000.

If you were a highly compensated employee, your contributions may have
been limited and the plan admin just did a poor job of explaining.
Most employees do not have this problem however.

If your plan is a SIMPLE 401(k) it should be clearly identified on
your statement. Otherwise ask your plan administrator. You should also
have a plan servicing agent (he often comes around to do the
enrolling). It has been my experience that the plan admin is often a
company employee that had this role "dumped on them" and doesn't know
jack about qualified plans.

On Feb 9, 9:38 am, dsar...[at]yahoo.com (Don) wrote:
- quote -

The government may allow a catchup. Your plan doesn't have to aloow
it. It sounds like your plan doesn't allow it.

Around 2001, just before I turned 50, I contacted my 401K plan
administrator for our agency regarding involvement in the 401K catch
up program, allowing additional investment from my paycheck beyond the
maximum annual allowed. It was very difficult communicating with him,
but he finally responded with an explanation that because I was
already contributing 15% and it amounted to the max dollar amount
allowed annually, I was not able to contribute any additional amount
as part of that program.

Occasionally I check usenet and web sites for clarification, but I
find it confusing. I have found tables listing the max amounts for
the last several years and it is true I have invested those max
amounts. But I interpret from what I've read that I should have been
able to contribute beyond those amounts, that being the very purpose
of the catch up.

Did I miss out on a substantial amount of money I could have been
investing over the last 5 years?

Also, when I look at these tables online, they are broken down into
columns of 401K and Simple. What is the difference and how can I tell
if my plan is Simple or not? I couldn't find that info on my 401K
portfolio. The amounts I have been investing do equal the maximum
Simple amounts I find in these tables, but even those tables seem to
indicate I should have been able to add additional amounts beyond
those maximum amounts.

Thanks,

Don