Originally Posted by
Probe
I dumped my PS into my 401k a couple of years ago and got burned. it is a different category of income than normal income, and I still got taxed before it went in. Better to put regular income in, and spend the PS at Shotgun Willy's or something useful like that.
Originally Posted by
APC225
All the usual deductions are taken out like union dues, state tax, etc, which gets federal taxed as income. Was there something different?
From the UAL MEC update on 12/22/2016:
Quote:
Profit Sharing
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
Plus this from January last year:
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.
An alternative strategy is too take your PS as income then temporarily up your PRAP withholding from normal income to match the PS amount.