Can my employer limit my maximum 401k contribution amount (below the IRS limit)?
Congratulations on your raise! Is my employer allowed to impose their own limit on my contributions   that's different from the IRS limit? No. Is it something they can limit at will, or are they required to allow   me to contribute up to the IRS limit? The employer cannot limit you, you can contribute up to the IRS limit. Your mistake is in thinking that the IRS limit is 17K for everyone. That is not so. You're affected by the HCE rules (Highly Compensated Employees). These rules define certain employees as HCE (if their salary is significantly higher than that of the rest of the employees), and limit the ability of the HCE's to deposit money into 401k, based on the deposits made by the rest of the employees. Basically it means that while the overall maximum is indeed 17K, your personal (and other HCE's in your company) is lowered down because those who are not HCE's in the company don't deposit to 401k enough. You can read more details and technical explanation about the HCE rules in this article and in this blog post. "Highly Compensated Employee Rules Aim to Make 401k's Fair would be the piece that I suspect you are missing here.  I remember hearing of this rule when I worked in the US and can understand why it exists.  A key quote from the article: You wouldn't think the prospect of getting money from an employer   would be nerve-wracking. But those jittery co-workers are highly   compensated employees (HCEs) concerned that they will receive a refund   of excess 401k contributions because their plan failed its   discrimination test. A refund means they will owe more income tax for   the current tax year. Geersk (a pseudonym), who is also an HCE, is in   information services and manages the computers that process his firm's   401k plan. 401(k) - Wikipedia reference on this:  To help ensure that companies extend their 401(k) plans to low-paid   employees, an IRS rule limits the maximum deferral by the company's   ""highly compensated"" employees, based on the average deferral by the   company's non-highly compensated employees. If the less compensated   employees are allowed to save more for retirement, then the executives   are allowed to save more for retirement. This provision is enforced   via ""non-discrimination testing"". Non-discrimination testing takes the   deferral rates of ""highly compensated employees"" (HCEs) and compares   them to non-highly compensated employees (NHCEs). An HCE in 2008 is   defined as an employee with compensation of greater than $100,000 in   2007 or an employee that owned more than 5% of the business at any   time during the year or the preceding year.[13] In addition to the   $100,000 limit for determining HCEs, employers can elect to limit the   top-paid group of employees to the top 20% of employees ranked by   compensation.[13] That is for plans whose first day of the plan year   is in calendar year 2007, we look to each employee's prior year gross   compensation (also known as 'Medicare wages') and those who earned   more than $100,000 are HCEs. Most testing done now in 2009 will be for   the 2008 plan year and compare employees' 2007 plan year gross   compensation to the $100,000 threshold for 2007 to determine who is   HCE and who is a NHCE. The threshold was $110,000 in 2010 and it did   not change for 2011. The average deferral percentage (ADP) of all HCEs, as a group, can be   no more than 2 percentage points greater (or 125% of, whichever is   more) than the NHCEs, as a group. This is known as the ADP test. When   a plan fails the ADP test, it essentially has two options to come into   compliance. It can have a return of excess done to the HCEs to bring   their ADP to a lower, passing, level. Or it can process a ""qualified   non-elective contribution"" (QNEC) to some or all of the NHCEs to raise   their ADP to a passing level. The return of excess requires the plan   to send a taxable distribution to the HCEs (or reclassify regular   contributions as catch-up contributions subject to the annual catch-up   limit for those HCEs over 50) by March 15 of the year following the   failed test. A QNEC must be an immediately vested contribution. The annual contribution percentage (ACP) test is similarly performed   but also includes employer matching and employee after-tax   contributions. ACPs do not use the simple 2% threshold, and include   other provisions which can allow the plan to ""shift"" excess passing   rates from the ADP over to the ACP. A failed ACP test is likewise   addressed through return of excess, or a QNEC or qualified match   (QMAC). There are a number of ""safe harbor"" provisions that can allow a   company to be exempted from the ADP test. This includes making a ""safe   harbor"" employer contribution to employees' accounts. Safe harbor   contributions can take the form of a match (generally totaling 4% of   pay) or a non-elective profit sharing (totaling 3% of pay). Safe   harbor 401(k) contributions must be 100% vested at all times with   immediate eligibility for employees. There are other administrative   requirements within the safe harbor, such as requiring the employer to   notify all eligible employees of the opportunity to participate in the   plan, and restricting the employer from suspending participants for   any reason other than due to a hardship withdrawal." "One description of what happened is at 401(k) Plan Fix-It Guide.  The issue is the plan was ""Top Heavy,"" i.e. those making a high income were making disproportionately larger deposits than the lower paid employees. As the IRS article suggests, a nice matching deposit from the employer can eliminate the lower limit caused by the top heavy-ness.  Searching on [top heavy 401(k)] will yield more details if you wish to research more." "On thing the questioner should do is review the Summary Plan Description (SPD) for the 401(k) plan.  This MAY have details on any plan imposed limits on salary deferrals.  If the SPD does not have sufficient detail, the questioner should request a complete copy of current plan document and then review this with someone who knows how to read plan documents. The document for a 401(k) plan CAN specify a maximum percentage of compensation that a participant in the 401(k) plan can defer REGARDLESS of the maximum dollar deferral limit in Internal Revenue Code Section 402(g).  For example, the document for a 401(k) plan can provide that participants can elect to defer any amount of their compensation (salary) BUT not to exceed ten percent (10%).  Thus, someone whose salary is $50,000 per year will effectively be limited to deferring, at most, $5,000.  Someone making $150,000 will effectively be limited to deferring, at most, $15,000.  This is true regardless of the fact that the 2013 dollar limit on salary deferrals is $17,500.  This is also true regardless of whether or not a participant may want to defer more than ten percent (10%) of compensation. This ""plan imposed"" limit on salary deferral contributions is permissible assuming it is applied in a nondiscriminatory manner.  This plan imposed limit is entirely separate from any other rules or restrictions on salary deferral amounts that might be as a result of things like the average deferral percentage test." Companies are required BY THE IRS to try to get everybody to contribute minimal amounts to the 401K's.  In the past, there were abuses and only the execs could contribute and the low paid workers were starving while the execs contributed huge amounts.   On a year-by-year basis, if the low-paid employees don't contribute, the IRS punishes the high paid employees.  Therefore, most employers provide a matching program to incentivize low-paid employees to contribute. This 9% limitation could happen in any year and it could have happened even before you got your pay raise, what matters is what the low-paid employees were doing at your company LAST YEAR. My old company did this and set a limit at 13 percent which for me kept me well below putting the max into 401k.  One had to make 120 - 130k to hit the irs max at 13 percent.  So any explanation that the limit restricts high wage earner is BS.  This limit restricts all low wage earners as their 13 percent max will be less than the max allowed.  If a person making only 70k wants to put 17k into 401k fact is theycannot do this because they do not make enough the limit is discrimination against low-wage earners. Period. YMMV, but I don't accept non-answers like that from HR.  Sometimes you need to escalate. Usually when I get this sort of thing, I go to my boss and he asks them the question in writing and they give him a better answer. (HR in most companies seem to be far more willing to give information to managers than employees.) Once we both had to go to our VP to get HR to properly listen to and answer the question. Policies like this which may have negative consequences (your manager could lose a good employee over this depending on how to close to retirement you are and how much you need to continue making that larger contribution) that are challenged by senior managment have a better chance of being resolved than when non-managment employees bring up the issue. Of course I havea boss I know will stand up for me and that could make a difference in how you appraoch the problem.
You might want to bring this fancy new IRS rule to your employer's attention.  If your employer sets it up, an After-Tax 401(k) Plan allows employees to contribute after-tax money above the $18k/year limit into a special 401(k) that allows deferral of tax on all earnings until withdrawal in retirement. Now, if you think about it, that's not all that special on its own.  Since you've already paid tax on the contribution, you could imitate the above plan all by yourself by simply investing in things that generate no income until the day you sell them and then just waiting to sell them until retirement.  So basically you're locking up money until retirement and getting zero benefit. But here's the cool part:  the new IRS rule says you can roll over these contributions into a Roth 401(k) or Roth IRA with no extra taxes or penalties!  And a Roth plan is much better, because you don't have to pay tax ever on the earnings.  So you can contribute to this After-Tax plan and then immediately roll over into a Roth plan and start earning tax-free forever. Now, the article I linked above gets some important things slightly wrong.  It seems to suggest that your company is not allowed to create a brand new 401(k) bucket for these special After-Tax contributions.  And that means that you would have to mingle pre-tax and post-tax dollars in your existing Traditional 401(k), which would just completely destroy the usefulness of the rollover to Roth.  That would make this whole thing worthless. However, I know from personal experience that this is not true.  Your company can most definitely set up a separate After-Tax plan to receive all of these new contributions.  Then there's no mingling of pre-tax and post-tax dollars, and you can do the rollover to Roth with the click of a button, no taxes or penalties owed. Now, this new plan still sits under the overall umbrella of your company's total retirement plan offerings.  So the total amount of money that you can put into a Traditional 401(k), a Roth 401(k), and this new After-Tax 401(k) -- both your personal contributions and your company's match (if any) -- is still limited to $53k per year and still must satisfy all the non-discrimination rules for HCEs, etc. So it's not trivial to set up, and your company will almost certainly not be able to go all the way to $53k, but they could get a lot closer than they currently do. The maximum you can contribute to both the 403(b) and 401(k) is $18,000. Take the amount you already contributed and subtract it from $18,000. That's how much you have left to contribute before maxing out. The deadline for contributing to a 401K is the last paycheck paid in December. That may not be the last pay period that ends in December. For example if the last pay period ends on Friday the 30th and you get paid on Thursday January 5th, that check is the first in the new year.  The US government has rules regarding how quickly the money needs to be sent to the 401K trustee. It is possible that the money may get there after the first of the year, but the important date for you is the date of the last paycheck in December. The company form to set the contribution rate (it could also be on a website) will have a deadline to determine if the rate makes the next check or the one after that. The form will also have a maximum amount as a percentage of the check. Some could allow up to 100% but yours might not. So how much you can put in with the last paycheck or two is up to company policy and your pay rate. The company forms or website will describe how the company match works. If you were try and put as much as possible into a few checks, it is possible to hit the $18,000 yearly limit in just a small part of the year. In some companies that would mean that you could miss out on company match money, because that would never be more than x% of each check. For example if you were to put $3,000 per check with a base pay of $5,000 every two weeks and if the maximum company match was 5%. After 6 checks you would be done: you would have put in $18,000 and the company would have put in $250 x 6 or $1,500. If you were to spread the money over all 26 checks you would still put in $18,000 but the company would have put in $6,500. "The Forbes article IRS Announces 2014 Retirement Plan Contribution Limits For 401(k)s And More spells this out pretty clearly.  For your wife - ""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 $181,000 and $191,000."" So, with your wife not covered by a 401(k), and your income below the stated limit, she can deduct the IRA contribution. When your income gets beyond that limit, she can make a non-deductible contribution and convert to Roth, if she wishes." If you are working for a small company, the expense ratios on the funds in the 401k account are likely much higher than you can get with a similar IRA. Depending on your income, whether you are married and want to contribute to a spouse's IRA, your limit on what can be contributed to an IRA may vary, but the compelling reason to contribute to a 401k is that the contribution limit is higher ($17,500 vs $5,500 for people on the lower end of the income scale) so you may need to contribute to a 401k to meet your retirement savings goals. You can ask your employer for anything that you want. However, most employers, if they are contributing their own money into your HSA, or you are contributing to your own HSA through payroll deduction, only work with one HSA, which is much easier for them to manage. You are free to decline their HSA if you want.  However, if they are kicking in free money into your HSA, I don't recommend that you decline it.  Just pick the best option you have for investing. As for the money that you are contributing, if you don't want to put your own money into your employer's Aetna HSA, you can open up an HSA with any institution you like.  You can even do this and still keep Aetna HSA to take advantage of the employer's contributions.  However, your annual limit is still the total of all contributions to all HSA's in your name, whether you make them or your employer makes them. When deciding whether or not to use payroll deduction into the Aetna HSA or to go your own way, keep in mind that payroll deduction skips some payroll taxes. "Some 401k plans allow you to make ""supplemental post-tax contributions"". basically, once you hit the pre-tax contribution limit (17.5k$ in 2014), you are then allowed to contribute funds on a post-tax basis. Because of this timing, they are sometimes called ""spillover"" contributions. Usually, this option is advertised as a way of continuing to get company match even if you accidentally hit the pre-tax limit.  But if you actually pay attention to your finances, it is instead a handy way to put away additional tax-advantaged money.  That said, you would only want to use this option if you already maxed out your pre-tax and Roth options since you don't get the traditional tax break on contributions or the Roth tax break on the earnings. However, when you leave the company, you can transfer the post-tax money directly into a Roth IRA when you transfer the pre-tax money, match, and earnings into a traditional IRA." Please note that if you are self employed, then the profit sharing limit for both the SEP and Solo 401(k) is 20% of compensation, not 25%. There is no need for a SEP-IRA in this case.  In addition to the 401(k) at work, you have a solo-401(k) for your consulting business.  You can contribute $18,000 on the employee side across the two 401(k) plans however you wish.  You can also contribute profit sharing up to 20% of compensation in your solo 401(k) plan.  However, the profit sharing limit aggregates across all plans for your consulting business.  If you max that out in your solo 401(k), then you cannot contribute to the SEP IRA. In other words, the solo 401(k) dominates the SEP IRA in terms of contributions and shares a limit on the profit-sharing contribution.  If you have a solo 401(k), there is never a reason to have a SEP for the same company. Example reference: Can I Contribute to a solo 401(k) and SEP for the same company? "if you have 401k with an employer already, has the following features: Your contributions are taxed That's only true if you're a high income earner. https://www.irs.gov/retirement-plans/2017-ira-deduction-limits-effect-of-modified-agi-on-deduction-if-you-are-covered-by-a-retirement-plan-at-work For example, married filing jointly allows full deduction up to $99,000 even if you have a 401(k). ""the timing is just different"" And that's a good thing, since if your retirement tax rate is less than your current tax rate, you'll pay less tax on that money." "Unfortunately, not directly.  For IRAs and HSAs, we have an annual maximum contribution limit. What you can do (which doesn't ""initially seed"" it) is to put the money aside in a savings account that you want to contribute to your HSA or IRA and then put it in the IRA or HSA when the timing is right for you.  The key here though is that the contribution cannot exceed the maximum limit for the year. Another ""way around"" this (which really isn't because it just means that you'll have a new higher limit) is to become self employed, see this from the IRS about SEPs: Contribute as much as 25% of your net earnings from self-employment   (not including contributions for yourself), up to $51,000 for 2013   ($52,000 for 2014). Still, none of these methods are pre-seeding an account, as the maximum contribution limit is never exceeded." "my taxable income was roughly $230,000 in 2012. Indeed it is relevant. The highest AGI limit for deductible IRA contributions is 112K. So no, IRA contribution will not help you reducing your tax bill this year. The deduction phases out starting from AGI limits of $10K in certain cases (for married filing separately), and phases out entirely for anyone at AGI of 112K (for 2012). The table linked describes the various deduction phase-out parameters depending on your filing status, and will probably be updated yearly by the IRS. However this is only relevant if your company provides a retirement plan, as Joe mentioned. If your company doesn't provide a retirement plan but your spouse's does - then the AGI phase-out limit is $178K. If neither you nor your spouse (if you have one) is covered - then there's no AGI limit, and you can indeed make an IRA contribution before April 15th that would be attributed to the previous year and reduce your tax bill. Note that ""provides"" means the plan is available, even if you don't participate in it, any time during the year." At least on 25K. Here's the actual IRS publication, it's fairly complex and the limits depend on the types of organization you're donating to, and the types of property you're donating. Some donations may be limited to the maximum of 20% of your AGI. Bottom line - the maximum you can deduct in almost all circumstances would be 50% of the AGI (very few exceptions allow deducting up to 100% of your AGI). Worth mentioning that whatever you cannot deduct this year - you can roll over to the next year. If they leave the extra funds in the account the IRS will consider it as employer match. They weren't funds from your paycheck, they were from the employers profits. Because they don't have a formal matching program the extra funds will still keep then under the max match.  There is one other explanation that needs to be considered. If the last paycheck from 2011 was near the end of the year (the last Friday of 2011 was December 30th) the 401K funds from that final paycheck may not have been deposited into your 401K until early January 2012. If you count contributions when looking at your 401K statement it will look like one two many for 2012; but the IRS only cares when it was deducted from your paycheck, not when it was deposited into your account. The Department of Labor only requires they be deposited by the 15th of the following month. "Your contribution limit to a 401(k) is $18,000.  Your employer is allowed to contribute to your 401(k), usually a ""matching contribution"".  That matching contribution comes from your employer, so is not subject to your personal contribution limit. A contribution to a regular 401(k) is typically made with pre-tax money (i.e. you don't pay payroll taxes on the money you contribute) so you pay less taxes for the current tax year.  However when you retire and you take money out, you pay taxes on the money you take out.  On one hand, your tax rate may be lower when you have retired, but on the other hand, if your investments have appreciated over time, the total amount of tax you pay would be higher. If your company offers a Roth 401(k) plan, you can contribute $18,000 of after tax money.  This way you pay the tax on the $18,000 today, as you would if you did not put the money in the 401(k), but when you take the money out at retirement, you would not have to pay tax.  In my opinion, that serves as a way to pay effectively more money into your 401(k). Some firms put vesting provisions on the amount that they match in your 401(k), e.g. 4 years at 25% per year.  So you have to work 1 full year to be entitled to 25% of their matching contribution, 2 years for 50%, and 4 years to receive all of it.  Check your company's Summary Plan Description of the 401(k) to be sure. You are not allowed to invest pre-tax money into a Traditional IRA if you are already contributing to a 401(k) plan and have reached the income limits ($62,000 AGI for single head of household). You are allowed to contribute post-tax money to a Traditional IRA plan if you have already contributed to a 401(k), which you can then Roll-over into a Roth IRA (look up 'backdoor IRA'). The IRA contribution limit applies to all IRA accounts over that calendar year.  You could put some money in a traditional IRA, a Roth IRA, another traditional IRA, etc. so long as the total amount is not more than the contribution limit. This gives you an upper limit of 5.5k + 18k = 23.5 investments in retirement accounts. Note however, once you reach age 50, these limits increase to 6.5k (IRA) + 24k (401(k)).  They also are adjusted periodically with the rate of inflation. The following approach may be more efficient for building wealth: This ordering is the subject of debate and people have different opinions. There is a separate discussion of these priorities here:  Best way to start investing, for a young person just starting their career? Note however, a 401(k) loan becomes payable if you leave your company, and if not repaid, is an unauthorised distribution from your 401k (and therefore subject to an additional 10% tax penalty). You should also be careful putting money into an IRA, as you will be subject to an additional 10% tax penalty if you take out the money (distribution) before retirement, unless one of the exceptions defined by the IRA applies (e.g. $10,000 for first time home purchase), which could wipe out more than any gains you made by putting it in there in the first place. Your specific circumstances may vary, so this approach may not be best for you.  A registered financial advisor may be able to help - ensure they are legitimate: https://adviserinfo.sec.gov" Yes, you are the proprietor of the business and your SSN is listed on Schedule C. The information on Schedule C is for your unincorporated business as a contractor; it is a sole proprietorship. You might choose to do this business under your own name e.g. Tim Taylor (getting paid with checks made out to Tim Taylor) or a modified name such as Tim the Tool Man Taylor (this is often referred to as DBA - Doing Business as), under a business name such as Tool Time etc. with business address being your home address or separate premises, and checking accounts to match etc. and all that is what the IRS wants to know about on Schedule C.  Information about the company that paid you is not listed on Schedule C.