Originally Posted by
rp2pilot
Yes, I see that, and I also went back and looked at the MEC update from 12/16/16 and read the same. My point being, regardless of FICA tax, I believe only the portion of profit sharing that's below 18,000 / 24,000 has the ability to be shielded from FEDERAL INCOME tax. I already add $1000 / month to my 401k, so I "believe" that, in my circumstance, only $12,000 of the profit sharing can be treated exempt from FEDERAL income tax. Is this how you understand the tax ramifications?
If you have your 401k contribution set to be $1000/ month pre tax and also $1000/month post tax then you will continue to donate post tax dollars into your PRAP after the 18/24 is reached (assuming more than 12k of profit sharing dollars contributed) If however you don't have the monthly contributions set up to continue after reaching the pretax limits, then you will have no issues with any money going in post tax.
There is a contribution selection section on the PRAP website that deals with your monthly contribution.
The tax issue that is discussed in the PRAP profit sharing selection is just over the fact that you can't really donate 100% of your profit sharing to your PRAP, because Uncle Sam takes FICA out of every pay check first before it does anything ( up to the FICA limits ) So, if you are getting $10,000 in profit sharing and want to contribute it all to your PRAP, you won't see the full $10,000 going into your account because FICA will come out first. That is not really an issue because though you will only get $9000+ going into your PRAP it won't have cost you any taxes you would otherwise somehow avoid and it will only count at $9000+ towards your limit of 18k/24k of pretax contributions.
Actually this same issue would happen to you if you elected on a monthly basis to contribute 100% of your regular paycheck. Since virtually none of us can afford to do that, it is never brought up.
So, if you are concerned about contributing post tax dollars, just check your PRAP elections and make sure that you have those set at 0.