Contribution limits when switching employers
Looking for advice on limits (with valid IRS citation/links preferred)
My situation:I have already maxed out my contributions and hit my 61k limit in May. (I am in my 30’s so no catch up in my case.)
Breakdown:
pre- tax 401k elective contribution via my pay – $20,500
Employer match contribution – $10,250
After tax (with in plan roth conversion)-$ 30,250
I plan to switch employer soon ( completely different company and not related to my current employer in any way) and my new employer also offers similar 401k plan with mega backdoor Roth option.
I know i can’t make pre tax 401k contributions, but what about after tax ( with in plan conversion).
How much more can I contribute?
I’ve researched a bit, but most examples seem to be about solo 401k, side hustle etc.
https://irahelp.com/slottreport/what-limits-apply-if-i-participate-two-company-plans
Can someone shed some light on this topic.
So far it looks like I can make another $30250 this year in after tax contributions with my new employer plan without going over 415 c limit.
But I want to be sure.
Permalink Submitted by William Tuttle on Sun, 2022-07-24 19:29
Permalink Submitted by Mocha Wocha on Sun, 2022-07-24 21:34
@spiritrideri really don’t follow your response. Are you saying I can contribute additional 61k as after tax with my new employer plan?
Permalink Submitted by William Tuttle on Mon, 2022-07-25 01:59
Yes, if there are no employer contributions and subject to any 401k plan limits and any ACP limitations. Some plans limit employee after-tax contributions to a certain percentage. If you will be an HCE, it is unlikely that ACP testing will allow you to make a contribution that large.
Permalink Submitted by Mocha Wocha on Mon, 2022-07-25 05:26
what is HCE and ACP? I am not familiar with these acronyms. (Company 2 is completely unrelated to Company 1, and both are large corporations with no control/ ownership stake on my part.) So looking at my company 1 contributions breakdown I’ve already made this year.Breakdown:
How much maximum can I contribute with company 2?
Permalink Submitted by William Tuttle on Mon, 2022-07-25 20:20
Permalink Submitted by Mocha Wocha on Tue, 2022-07-26 05:55
Thanks for the breakdown and detailing the acronyms.
Permalink Submitted by William Tuttle on Tue, 2022-07-26 11:20
As I stated in my first post.
Permalink Submitted by Mocha Wocha on Tue, 2022-07-26 14:23
it’s still not clear how limits are applied/calculated across 2 employers come tax season. Can you share an example of what you mean by annual addition is separate?
Permalink Submitted by Alan - IRA critic on Tue, 2022-07-26 15:28
Permalink Submitted by Mocha Wocha on Tue, 2022-07-26 19:05
So it looks like, as long as company B plan allows it. I can deposit full 61k making only after tax contributions with my company B and it has no bearing to the 61k I’ve already made with company A.
Permalink Submitted by Alan - IRA critic on Tue, 2022-07-26 19:59
The in plan Roth rollover (IRR) that you did with the first plan and will also do with the second plan are rollovers, just confined to the same plan. Some plans offer an automatic IRR as soon as the after tax contributions are made, and that reduces any gain on those contributions that would be taxable as part of an IRR. Some plans that offer IRRs also offer rollouts to your Roth IRA, and some do not.
Permalink Submitted by Mocha Wocha on Tue, 2022-07-26 20:14
I did automatic in plan conversion with my company A after tax contributions. There was an option “Convert in plan to Roth” in fidelity i plan to do the same with company B. Are you saying that’s considered a rollover/IRR?
Permalink Submitted by Alan - IRA critic on Tue, 2022-07-26 20:40
Yes. It’s a tax free rollover to the Roth 401k account in your plan. This has no effect on the amount of after tax contributions you can make, but if you exceed the plan limit (which could be less than 61,000), the excess amount which is now in the Roth 401k will have to be distributed back to you.
Permalink Submitted by Mocha Wocha on Wed, 2022-07-27 02:00
just curious, is there any penalty from IRS for excess contribution and distribution?
Permalink Submitted by Alan - IRA critic on Wed, 2022-07-27 02:06
There is no early distribution penalty, but any earnings distributed on the excess contribution will be taxable in the year distributed.
Permalink Submitted by ssel on Wed, 2022-07-27 04:25
Permalink Submitted by Mocha Wocha on Wed, 2022-07-27 04:40
Thanks for clarifying the double taxation issue in excess contributions. Sadly my company won’t match any after tax contributions. I’ll make sure not to cross 61k in after tax contributions at company B.
Permalink Submitted by William Tuttle on Wed, 2022-07-27 13:16
Permalink Submitted by Mocha Wocha on Wed, 2022-07-27 22:23
Permalink Submitted by William Tuttle on Wed, 2022-07-27 23:14
You need to stop reading too much into things. I can’t say things any clearer than I have. Maybe it is me, but I will not be replying anymore to this thread.
Permalink Submitted by Mocha Wocha on Thu, 2022-07-28 05:13
Thank you for your help. 1 feedback (and take it with a grain of salt) overall, I felt your comments were verbose in terminology and text, but didn’t answer the question in simple straightforward way, it would have been much more effective using the numbers and scenario I provided. But anyways once again thank you for your help.