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ACap Asset Management
Protecting Your Financial Health
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Fee-Only Financial Planning and Investment Services
For health care professionals, business owners, and individuals
Get a pulse on your financial position

July ACap ReCap

Can my employer limit my 401k contribution?
Yes and no. The maximum amount you can contribute to your 401k plan is the lesser of $17,500 (for 2014) or 100 percent of your compensation. Your employer cannot further limit how much you can contribute to your 401k plan because these are IRS imposed limits; however, your contributions may be disallowed and returned to you if you are considered a Highly Compensated Employee ($115,000 / year or own more than 5 percent of the business). 401k plans must undergo annual compliance tests to ensure highly compensated employees are not the only employees benefiting from the 401k plan; therefore, the Department of Labor imposes rules that prevent highly compensated employees from contributing to their 401k accounts if not enough non-highly compensated employees in the same company/business are contributing to their 401k accounts as well. If you are a highly compensated employee and you want to max out your 401k plan, encourage the younger and/or non-highly compensated employees to contribute too – it will help you and them in the long run.

 

Have a financial question? Contact ACap Asset Management at info@acapam.com or 818-272-8511.

Ara Oghoorian, CFA, CFP® is the president and founder of ACap Asset Management, Inc., a “Fee-Only” investment management firm located in Los Angeles, CA specializing in helping doctors and physicians make sound financial decisions. Visit us at www.acapam.com