Payroll deduction change screwed up other benefit contributions

[disneysteve]

My job caps 401K contributions at 50% of income. I wonder if this is one of the reasons they set that limit.

[Like2Plan]

My job caps 401K contributions at 50% of income. I wonder if this is one of the reasons they set that limit.

I bet it is. DH's old 401K had a 75% limit on pretax and 50% limit on Roth. But, his new 401k is 75% for either option. DH would run into the same trouble as Scallywag's DH if he tried to do 75% on the Roth option. In Jan, they will add the SS deduction back in so the amount he could contribute would be further reduced...

[disneysteve]

That makes sense.

So if the gross pay is $5,000, then $3,750 would go to the Roth 401K. Other pre-tax deductions (health insurance, etc.) would come out of the remaining $1,250. Then whatever was left would be taxed. I can see that leaving not much.

I realized this was incorrect. The money going into the Roth is still taxed, right? So if you earn 5K and $3,750 goes to the Roth, you're still taxed on the full 5K. No wonder nothing is left.

[Like2Plan]

I realized this was incorrect. The money going into the Roth is still taxed, right? So if you earn 5K and $3,750 goes to the Roth, you're still taxed on the full 5K. No wonder nothing is left.

Yes. I'm not sure about the ordering of the deductions. But, I think taxes are probably first in line. In your example above, the pretax amount (for healthcare) would be excluded in the calculation of how much is deducted for the federal, state and FICA taxes.

[Scallywag]

That makes sense.

So if the gross pay is $5,000, then $3,750 would go to the Roth 401K. Other pre-tax deductions (health insurance, etc.) would come out of the remaining $1,250. Then whatever was left would be taxed. I can see that leaving not much.

I don't know how they did this. I would assume that they would first take out the MANDATORY deductions - taxes (Fed, State, SS etc, HEALTH insurance, FSA etc - and then deal with after tax deductions such as the ROTH and other "voluntary" benefits.

In fact, I would never ever want to be in a place where they did NOT withhold taxes or God forbid health insurance but instead went and funded the ROTH first. Thank God they paid the taxes AND our health insurance. Maybe homo habilis does have a brain that works once in a while, after all.

BUT, they did NOT take out the FSA amount (!) and the legal insurance premiums so I'm now worried about the FSA, on top of the legal plan. YIKES!

[Cronie]

With its taxes, the government only creates more problems. Half of them don't do any good. Any company owner must understand that the employees' desire to perform their duties well depends on their salaries. And how can you pay a good wage when absolutely every accrual is taxed in some way? To not get mixed up in all these calculations, it is essential to use the services of a good accountant. My friend advised me to use the services of this company payrollindex.com. It develops software to automate payroll payments. I have been working with them for a long time and have never yet encountered any problems.