OK, I've got my VEBA where I want it and now want to minimize spillage from the 16% 401k contributions. (In previous years, I maxed out spillage to get my VEBA account built up)

From my understanding, $285k (2020 max) x .16 = $45,600 into my 401k.

401k limits for 2020 are: $57K + $6.5K (over 50 catch up) = $63.5K.

After the company contributions, I need to add another $17.9K from my paycheck to max out 401k contributions.

I realize the contribution percentage could change with a new contract, although the only modification I'd make is to give more flexibility for those that earn more than $285K (ie eliminate automatic spillage into VEBA).

Are there any errors in what I've written above?

Thanks in advance.

 

So 45,600 is the max the company can put into your 4001k?
Is that correct?

 

No
He is saying if you make 285k this year the company contribution (16%) would be $45,600.

 

https://www.irs.gov/newsroom/401k-co...-rises-to-6500

WASHINGTON — The Internal Revenue Service today announced that employees in 401(k) plans will be able to contribute up to $19,500 next year.


Highlights of changes for 2020
The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $19,000 to $19,500.

The catch-up contribution limit for employees aged 50 and over who participate in these plans is increased from $6,000 to $6,500.

The limitation regarding SIMPLE retirement accounts for 2020 is increased to $13,500, up from $13,000 for 2019.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver's Credit all increased for 2020.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or his or her spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor his or her spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase-out ranges for 2020:

For single taxpayers covered by a workplace retirement plan, the phase-out range is $65,000 to $75,000, up from $64,000 to $74,000.
For married couples filing jointly, where the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is $104,000 to $124,000, up from $103,000 to $123,000.
For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $196,000 and $206,000, up from $193,000 and $203,000.
For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.


The income phase-out range for taxpayers making contributions to a Roth IRA is $124,000 to $139,000 for singles and heads of household, up from $122,000 to $137,000. For married couples filing jointly, the income phase-out range is $196,000 to $206,000, up from $193,000 to $203,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

The income limit for the Saver's Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $65,000 for married couples filing jointly, up from $64,000; $48,750 for heads of household, up from $48,000; and $32,500 for singles and married individuals filing separately, up from $32,000.
Key limit remains unchanged

The limit on annual contributions to an IRA remains unchanged at $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.

Details on these and other retirement-related cost-of-living adjustments for 2020 are in Notice 2019-59 (PDF), available on IRS.gov.

 

serious question, please help a newb out-

are you saying that the maximum amount ANY company is allowed to contribute an employee's 401k is $45,600? i.e. if you make more than 265k, the IRS just says "that's enough, you're only allowed to calculate your company's % contribution on a maximum salary of 265k.

clearly i don't understand how this works. I thought you just added your max $19k (plus catchup if eligible), and the company contributed 16% of whatever your W2 says

 

The way I understand it is yes, after 280K, the company cannot contribute to a retirement account. United had two options when a pilot reached 280K, put the 16% on top of regular pay with the pilot then paying ordinary income taxes on it or, and luckily decided upon; put the 16% into the RHA account tax free. You never stop receiving your 16% contribution from the company, you just cannot contribute it to your 401k. It goes to the RHA (Retiree Health Account for those not at UAL), which is invested in the targeted based retirement account tailored to your year of retirement and grows tax free until you hit the retirement age and are eligible to start using that money (around 300K for a typical pilot hired in his/her 30s) for health related expenses in retirement.

What YOU decide to do with pre-tax 401K contributions is limited to either 19,500(plus 6,000 if over 50) or the combination of the company’s contribution plus yours for a total of 56,000 pre tax. You can always contribute to a retirement account post tax (and I do so heavily) when you max out your pre tax accounts. I choose to limit my 401K contributions to an amount that limits the spillover as much as possible but then I contribute post tax to separate retirement accounts. This ensures I get the max amount from my B fund going into my 401K and when, around the end of September, I see the spillover emails, I adjust my contribution to make sure I hit the 56,000 limit. My goal is to match the 56,000 in a post tax account as well so I’ll hit my target goal at age 64.

 

If only the R&I committee would put something out on this! Imagine going to the MEC website and searching the R&I e-library.

 

If only.....

 

OK, now that's funny.

We cannot have PRAP contributions based on income greater than 280k, or 285k for 2020, due to 401(a)(17) limit.

If you make 385k, you are 100k above the limit and your 16% B&C will spill to the RHA. ($16,000 to RHA)

Nothing can be done about that.

415(c) limit is another issue and the amount that spills can somewhat be controlled by the timing and amount of your contributions.

Want to maximize spillage to RHA? Put in as much as you can as early in the year as possible.

Want to minimize it? Put in less. In this example you would put in 17,900 to combine with the 45.6k to equal 63.5k.

you can run some howgozits at online RHA Calculator at

RHACalculator.com

It was just updated for 2020 numbers and based on your inputs will show how much will spill and and let you change contributions easily to see how it flows.

Unofficial, but works well and gives you breakdowns on the type of spill and potential balance at retirement.

 

Didn't know it existed, thanks everyone- for anyone else looking to have it simplified.... read the bold part

The Internal Revenue Code (IRC) limits the maximum dollar amounts that can be contributed to the PRAP each year. For 2019, there is a combined limit of $19,000 for employee pretax and Roth 401(k) contributions. Pilots age 50 or older in 2019 may contribute an additional $6,000 annually in 401(k) “catch up” contributions.
There is also a combined limit of $56,000 (or 100% of your compensation, if lower than $56,000) for all employee and company contributions in total. If you will be age 50 or older in 2019, your contribution limit is increased by $6,000 due to the “catch up” contribution provision. The $56,000 limit applies to your total pretax contributions, Roth 401(k) contributions, post-tax contributions, and any company contributions made on your behalf to the PRAP. If you reach the 415(c) limit of $56,000, any future company contributions (16% or vacation forfeiture) that would have gone to the PRAP will instead be contributed to your Retiree Health Account (RHA).
IRC 415(c) Limit in 2019 Lesser of $56,000 or 100% of compensation.
Those 50 or older can contribute $6,000 in 401(k) catch up contributions, and catch up contributions do not count
toward the 415(c) limit.
The IRS also limits the amount of annual pay that may be taken into account for the PRAP. The limit for 2019 is $280,000. Pilots who earn more than $280,000 will not have the 16% on the amount greater than $280,000 go into their PRAP accounts; instead, an equal amount will go into their RHA. For instance, a pilot earns $290,000 in 2019, the 16% attributable to the amount between $280,000 and $290,000 cannot go into his PRAP; instead, the amount ($10,000 x 16% or $1,600) will be deposited into his RHA.
The sum of your Roth 401(k) and pretax contributions cannot exceed $19,000 for 2019.