Originally Posted by
ShyGuy
Can anyone explain 401k limits from the employee and employer standpoint?
Say one makes 250k and company gives 15% DC and Employee puts 10% for the 401k. So employee math shows 25k and the company gives 37.5k for the year.
Where does the 18.5k and 55k limits come in?
Is 18.5k the max limit on the employee, so in this case you can put in 10% but as soon as you hit 18.5k your paycheck will no longer deduct towards the 401k?
And what case does "cash over cap" happen?
These are IRS limits for qualified defined contribution limits - personal being 18.5k after which the company stops deducting your 401k contribution. Then you have the company contribution.... the IRS limits the company to $36.5k contribution per year. Total being $55k for 2018.
Now, if the company contributions were to reach $36.5k for the year, the excess is paid out to you on a paycheck. At Southwest, that’s how it works and pretty sure at any legacy. In our case at Southwest, our profit sharing is also considered a qualified retirement plan. So, if you’re under 50, it goes like this:
Your 401k contribution (max $18.5k if you’re under 50) + Company 401k contribution/NEC/B-plan + ProfitShare cannot exceed $55k for the year.
If it does, you get the excess in taxable cash or you can put it in nonqualified accounts but these accounts then aren’t secure in the event of a bankruptcy.