401K non-discrimination testing

[twowheeled]

I just received a check from my 401K plan because of this "non-discrimination testing". We were sent a letter concerning this about a month back. I didn't think it would affect us, since it hasn't in the past. BUT IT DID!!! sent me a check for 5K that I have to pay tax on now. I know I'm not the only one recieving a check. I'm guessing that in order to pay more into my 401K, I have to make less? Just doesn't sound right?
Anyone know about this? Accepting any advice, or contributions to pay the tax.

 

[Mustang]

Sorry, no advice or contributions to help you pay your taxes, but I'll join you in the state of confusion!

This is the first I've heard of this.....

I'm assuming it's if you put in more $$ than allowed and they are returning funds to you?

Why are they calling it 401K non-discrimination testing?

I'm only adding more questions to your list!

 

[wily_old_vet]

Dont know for sure but it might have something to do with the balance contributed by higher paid salary workers to the hourly workers. It's some kind of fairness thing.

 

[squeekywheel]

I received as well and was very disappointed.

Looking around on the web yielded some info on how UPS could have avoided the problem (checkout https://web.archive.org/web/2006020...mentary/2004/SafeHarbor401kfor2005_111104.htm)

As I read it, a safe-harbor 401K plan will never fail the ADP test. The main difference between the current UPS plan and a safe-harbor plan is a 50% company match on contributions between 3% and 5%.

If concerned, please contact HR and/or Atlanta.

The company has encouraged us to plan for our retirement using the 401K plan. Lets encourage UPS to structure the 401K plan to be of the most use to us.

 

[twowheeled]

Like Wiley and Squeeky said, This is some sort of fairness thing. It seems that, it depends on how much lower paid workers decide to pay into the 401K. If the typical 22 year old is not of the same mind set as a 40-50 year old, setting money into a 401K for retirement, then the limits are lowered on the maximum contributions into your 401K.

Like Squeeky said, UPS can make 3-5% contributions which should solve this, but I just don't see UPS doing that. I think we're going to get more talk on this. If you made more than 80K last year, I think your affected (infected). This will be next year and every year after also.

 

[jules23]

two wheeled...you've probably already thought of or have done this...since the money was already ear-marked for retirement, why not put it in an IRA (Roth or Regular)? I know the Roth would be taxed, but it would still be another nest egg for retirement.

Just a thought

 

[twowheeled]

thanks Jules. Your right, I've already done did that! My girlfriend is looking at the check and says: What's the problem?? totally different mind set they have. she wants to go to South coast plaza with the check.

I don't think so!

Problem is, it is going to very hard for anyone in UPS making over 80K to plan for their 401K. they apparently do this testing in March of the following year. You save all year and may get it returned to you the next year?

 

[tieguy]

I agree . I wish they would tell us what the magic number was so we could plan to stay below it.

 

[spidey]

I gotta say it, but there are worse problems to have. Think of it as a positive thing. There are too many people out there trying to figure out how to make grocery money stretch till payday, and others trying to make bail.

I give thanks everyday that we have what we have.

 

[toonertoo]

It isnt a positive thing for those above and beyond child rearing, and planning for their retirement, who have already made the sacrifices of raising children and making ends meet, and sacrificing NOW to put away enough money to feed and clothe themselves as they enter the golden years! Im not one of them, but it is a sacrifice at any level to put money away. And then have it thrown back, I dont get it.

 

[spidey]

Yes, it is. If you consider that you live better than 93% of the worlds population when you woke up in a bed with a job and food and children that have a better chance of living past the age of 5 than not.

Be thankful for what you have. I was trying to be lighthearted, but you just have to argue, don't you? Roll it into another retirement account. You may have to pay taxes on it, but it WAS income you were not allowed legally to put away. Deal with it. Put it into a roth. Buy a boat. Buy 5,000 Whopper Jrs. You are still luckier than almost everyone else in the world.

 

[toonertoo]

No actually I was't arguing, just stating a fact, that people who are able to put away larger amounts of money seemed to be the losers here. I dont see how it ruffled anyones feathers....
93% ?

 

[jules23]

thanks Jules. Your right, I've already done did that! My girlfriend is looking at the check and says: What's the problem?? totally different mind set they have. she wants to go to South coast plaza with the check.

I don't think so!

Problem is, it is going to very hard for anyone in UPS making over 80K to plan for their 401K. they apparently do this testing in March of the following year. You save all year and may get it returned to you the next year?

LOL...i honestly can't say i blame your gf for wanting to go shopping. i would be tempted, too.

yes, it is hard to plan. think of it this way. ups matches us with stock...if you're in management and get mip that's more stock. if you get some money back from 401k, it's just a chance to diversify some more of your retirement holdings. bad side/good side...the 401k, depending on where your holdings are, is performing very well, so i understand wanting to keep it there, too.

 

[wily_old_vet]

Jules-Union people get no match.

 

[jules23]

Jules-Union people get no match.

:O oops, was assuming he was management because of a few different statements, but color me wrong - my mistake.

 

[upsdawg]

Jules-Union people get no match.

Wily Coyote------there is no match at this time, but I am hearing that Overnite is getting a 100 match for up to 12% in their 401k----I am hoping that this will be something that may be an option when our next contract comes up!!

 

[wily_old_vet]

DeputyDawg-Overnite is non union as is UPS mgt...both get the match. Teamsters get no match and I doubt they ever will. Would imagine when the UPS 401ks were first set up that the company offered a match to the Teamsters who said no because the match is with UPS stock. If my memory is correct the Teamsters didn't want us becoming stockholders fearing it would dilute their power.