Originally Posted by
DLax85
I don't fully understand what you are asking...
Here's my understanding: B Fund Contributions and Excess Sick/Disability are two separate unrelated things --- though, both may end up in the same account.
If your retirement account is already at $61K max at the end of the year, there's no room for any of your Excess Sick/Disability to be contributed. It's paid directly to you as taxable income. Thus, you will always get paid out this excess amount (....up to 72 hours of sick), regardless of what you've contributed Pre-Tax or Roth.
For any pay period where your total earnings are still below $305K, and the company attempts to make a 9% B Fund payment to you, BUT you've already reached the $61K max due to additional ROTH 401K contributions you've elected to make, then you're out of luck, and no payment is made to you at all.
An Example: Let's assume you've made $280K in the first 11 months of the year. Thus, the company has contributed $500 match + $25,200 (9% B Fund). Let's also assume you contributed $20,500 (max pre-tax), and an additional $14,800 in voluntary ROTH (after-tax) contributions. Total it all up = $61,000
In Dec, you gross another $25K....which puts you at $305K for the year. The company would normally contribute another $2,250 (9% of $25K) but CAN'T do it, because you've already hit the $61K IRS limit.
Moral: Don't fill up your retirement to $61K too fast/too early with extra ROTH contributions - it can cost you "free B Fund money". The union has put warnings out about this for many years.
My question revolves around you stating that the company can put the excess sick bank money in your Roth 401K. As I understand it, all company contributions are tax deferred contributions while a Roth 401K is funded with after tax money and grows tax free. If the company is putting that money in your Roth 401K, who is paying the taxes on that after tax money, you or the company. If it is the company, then I see the benefit of having that money put in the Roth 401K rather than paying it to you and letting you put it in. If you are paying the taxes on it, then does it really matter who puts the money in the Roth 401K? Maybe you didn't mean that the company was putting the money in a Roth 401K, or I just misunderstood what you were saying. Maybe you were talking about tax deferred contributions that you would pay the taxes on upon withdrawal.
I do understand the potential hazards of allocating too much to contributions before the company max's out their B plan contribution, but it is good for everyone to review so they don't lose potential company money.