4 ms·
The rounding is baked into the law. > I.R.C. § 219(b)(5)(C)(ii) Rounding Rules — If any amount after adjustment under clause (i) is not a multiple of $500, suc
by junar 5y ago
The rounding is baked into the law.
> I.R.C. § 219(b)(5)(C)(ii) Rounding Rules — If any amount after adjustment under clause (i) is not a multiple of $500, such amount shall be rounded to the next lower multiple of $500.
https://irc.bloombergtax.com/public/uscode/doc/irc/section_219 https://irc.bloombergtax.com/public/uscode/doc/irc/section_2...
- lotsofpulp 5y agoThere is absolutely no reason the law was written to limit IRA to $6k while 401k is $20.5k other than to give larger employers or other employers who can afford administering 401k an advantage over smaller employers who cannot. A married couple with both working at companies offering 401k gets to save $40k+ pre tax, but a married couple with one spouse working at a local small shop not offering 401k gets to save half as much.
- gowld 5y agoWhy doesn't the shop have a 401k? Doesn't the owner want to save for retirement?
- lotsofpulp 5y agoThey cannot afford it. 401K have administration costs and you have to make it lucrative enough such that both employees participate to pass non discrimination testing, and lots of small businesses are just barely eking out an existence with owners taking little profit other than sweat equity.
- mNovak 5y agoBeen a while since I looked at safe harbor 401ks, but I think you just have to offer it, not force employees to join. And admin costs are going down; I think something like $50 +$8/per/mo on Guideline. Not nothing obviously, but can be recouped pretty quickly if you're maxing out even just employee contribution.