Originally Posted by
Techsan15
Reviving this old thread for 2019.
Can someone explain to me the tax treatment for the defined contribution plan/B Fund/401(k)? The 2019 limit for a 401(k) is $19,000/yr and obviously most airline pilots will easily eclipse this. My main three questions are this:
1) What is the proper term for the account where these automatically contributed retirement funds go?
2) Is the account tax-sheltered like a 401(k) or considered after-tax?
3) If the account is a 401(k), can it all be treated as pre-tax money even if it exceeds the $19K annual limit set by the IRS?
It's a 401k, but the employer can make Direct Contributions (match or just an unmatched contribution) above the $19K limit.
Age 50+ can do "catch up" employee deferrals of an additional $6K above the $19K.
There's a total limit of $55k for all employee + employer contributions.
Most or all better majors today do a 15-16% contribution (no match required). So many major airline pilots max out the 401k total cap just from the employer DC.