Originally Posted by
Probe
I made the mistake of putting a lot of mine in the PRAP last year. I found out after that it doesn't go in completely "before tax". I don't remember the details, but it is a different category of income, and is treated different under tax law.
So if you put it in your PRAP, you will still get taxed, and will fill up your limit with "POST" tax money instead of pre-tax money. Seems to me the wrong way to go.
I wish the union would have advised us of this. I cost me a few thou of tax.
Originally Posted by
rp2pilot
Thanks for the heads up .. I'm hoping the MEC sends out info on this in the near future as I'm trying to figure out the tax ramifications. I "believe" that our personal contributions (separate from the company's) are subject to the 401k limits of 18,000 / 24,000(over50), so a portion of it should go in pre-tax.
The MEC
did send something out, but if you don't read your emails you'd think they hadn't...
From the UAL MEC update on 12/22/2016:
Profit Sharing
The company’s year-end earnings announcement will take place on January 12, 2017. Eligible employee profit-sharing percentage announcement will be made the following day.
Profit sharing payments will be paid on a separate check February 27, 2017.
For pilots that wish to defer a portion of their profit sharing to their 401(k) plan, they will be able to make 401k elections by going to Flying Together > Employee Services > My Info > Continue to My Info and Manager’s Toolbox > Profit Sharing 401k Election. The 401k election for profit sharing can only be made on Flying Together. Your Schwab 401k election that applies to your February 16 and March 1 paychecks is not attributable to your profit sharing payment.
The deferral election window is currently projected to be open from January 23, 2017 through February 10, 2017, and will be available to anyone on a leave of absence as well as active employees. Profit sharing payments are not eligible for company B/C Plan contributions.
If a participant elects 100% of their profit sharing payment to go into the 401k, they will not see all of their profit sharing payment go into the PRAP. The reason being amounts contributed to the PRAP under 401k elections, though not subject to income tax, are subject to FICA tax. The company must hold back enough of the profit-sharing payment to cover the FICA tax on the 401(k) contribution, and the amount held back to cover FICA withholding is itself subject to Federal, State, and local income taxes, so the hold back is increased to cover those taxes as well.
Due to IRS regulations regarding special payments, such as profit sharing, federal income tax withholding will be 25% for any profit sharing amount distributed to you in your paycheck, but, as noted above, to the extent your profit sharing is deposited in the PRAP pursuant to the special 401(k) election, it is not subject to federal income tax withholding.