Author Topic: Overheard at Work  (Read 5301733 times)

merula

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Re: Overheard at Work
« Reply #10050 on: August 12, 2015, 02:59:08 PM »
Yes, but that is not a reason alone to prevent it.
I'm not saying I'd withhold the advice if I actually knew the guy.

Depends on how much you like saying...

Paul der Krake

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Re: Overheard at Work
« Reply #10051 on: August 12, 2015, 03:06:49 PM »
He might be referring to the hardship withdrawal rules for the 401k.  This depends upon the rules of the 401k more than anything, but some form of proof of hardship must be documented to the IRS the following April 15th, and they can disallow it if they don't believe it.  Just getting laid off is unlikely to qualify, particularly to an amount that would cover an entire mortgage.  It would work if the amount was comparable to the mortgage payment during the time of the layoff, in order to avoid forclosure actions; but like many of the withdrawal penalty exceptions, this one hasn't really be tested in court, so we don't know how far it can be taken before it is disallowed.
Am I an asshole for hoping nobody points this out, and he does it, and totally screws himself? :P

Yes, but that is not a reason alone to prevent it.
I've withheld information before, mostly to see what would happen. Living vicariously through others can be just as fun, and a lot easier on the wallet.

Pylon

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Re: Overheard at Work
« Reply #10052 on: August 12, 2015, 05:40:10 PM »
Finally have something to contribute. It's not that my office is so great with their money, but it's usually just the normal stuff that we all hear if money is brought up at all.

CW 1: My boyfriend says he can't wait to get laid off so he can pay off his house. (Apparently he's been slacking off for the last year to try and accomplish this.)

CW 2: How does that work?

CW 1: He says that if he gets laid off he will take money out of his 401K to pay off the house because he can withdraw money without penalty if he's unemployed.

Me (around the corner): WTF are these people thinking??

Well, that might work if he's 55 or older this year. Not that it's a good idea, but it would at least work.

Too bad, it'd be pretty handy for RE if being unemployed would let you access your 401k.

He might be referring to the hardship withdrawal rules for the 401k.  This depends upon the rules of the 401k more than anything, but some form of proof of hardship must be documented to the IRS the following April 15th, and they can disallow it if they don't believe it.  Just getting laid off is unlikely to qualify, particularly to an amount that would cover an entire mortgage.  It would work if the amount was comparable to the mortgage payment during the time of the layoff, in order to avoid forclosure actions; but like many of the withdrawal penalty exceptions, this one hasn't really be tested in court, so we don't know how far it can be taken before it is disallowed.

He's pretty firmly in his 40s I believe...

Pylon

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Re: Overheard at Work
« Reply #10053 on: August 12, 2015, 05:44:14 PM »
Yes, but that is not a reason alone to prevent it.
I'm not saying I'd withhold the advice if I actually knew the guy.

Too bad I don't know him. And I don't know my coworker well enough to be saying anything to her about her boyfriend...  Guess I'll just have to wait to see if it happens to come up again in the future.

lifeinhd

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Re: Overheard at Work
« Reply #10054 on: August 13, 2015, 07:34:44 AM »
I've withheld information before, mostly to see what would happen. Living vicariously through others can be just as fun, and a lot easier on the wallet.

I've intentionally said very antimustachian things to coworkers just for my own amusement. Nothing about myself, but things that reaffirm their poor choices, e.g. they tell me they live 35 miles away, I say "oh yeah, you can get a lot more house out there!" or they say their BMW's in the shop again and I say "yeah, but it's totally worth it for when it's out, right?" My coworkers are about as antimustachian as they come, so I have fun with it.

iowajes

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Re: Overheard at Work
« Reply #10055 on: August 13, 2015, 09:02:25 AM »


Whoa. Cloth isn't allowed?  How? Why?

Probably due to shared washing machines.

mm1970

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Re: Overheard at Work
« Reply #10056 on: August 13, 2015, 10:22:52 AM »

Flat dollar makes sense if you're contributing the full $18K.  I'm guessing that less than 2% of 401k participants actually do that.

Mine doesn't even allow me to do that.  The individual percentage contribution isn't high enough for me, or pretty much anyone, to max out the annual pre-tax.

You aren't able to adjust it?  For instance, I could set it to 24% if I wanted to max out my 403b.
Doesn't matter that the company mandates 3%- change it.

The max allowable is 10% of gross wages.

Allowable by whom?  Even if the web form doesn't go higher, you should be able to have HR manually adjust it.

Some places have problems with failing 401k discrimination testing because the amount that Highly Compensated Employees contribute is higher than the amount that Non-Highly Compensated Employees contribute, beyond some allowable bounds. Some companies limit contributions to reduce the chances of that happening. I've heard of company-set limits that don't allow people to contribute beyond the match, so no more than a couple percent in some cases. There are other ways to fix it. My dad has had some contributions returned to him the last couple of years. Some companies give a fully-vested contribution to NHCEs to close the difference. Certain plan designs give people incentive to contribute enough to close the gap.

Not necessarily what's going on here, but those low limits aren't uncommon.

This might be the root cause, because I'm considered a "highly compensated employee" here.
That's entirely possible.

The highly compensated definition is determined by the IRS. 

I got hit by that the first time I sold stock in my old company (stock options).  The company, at the time, didn't match.  I was then limited to 4% for the next year.

I made sure to schedule my sales after that to all fall in a single year.  My salary alone has never been high enough to be an HCE.  It was only the stock that put me over.

Eventually that company started matching, which removes the HCE issue.

zataks

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Re: Overheard at Work
« Reply #10057 on: August 13, 2015, 12:47:26 PM »

The highly compensated definition is determined by the IRS. 

I got hit by that the first time I sold stock in my old company (stock options).  The company, at the time, didn't match.  I was then limited to 4% for the next year.

I made sure to schedule my sales after that to all fall in a single year.  My salary alone has never been high enough to be an HCE.  It was only the stock that put me over.

Eventually that company started matching, which removes the HCE issue.

Matching only helps to a certain extent.  Without looking it up again, I don't remember the exactly language, but despite matching, my wife can only contribute up to 10% of gross because she is an HCE.  IIRC, it has to do with the amount of employees participating and rate at which they contribute?  Maybe that last part is not right though.  Hard to remember.

Zaga

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Re: Overheard at Work
« Reply #10058 on: August 13, 2015, 03:01:50 PM »
There are a significant number of people to whom "debt free" means no credit cards.  Makes me twitchy, I won't consider myself debt free until all debt in both my name and my husband's name is gone!  We're working on the last one now, and it's only in his name.  But I'm still not debt free.

Chris22

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Re: Overheard at Work
« Reply #10059 on: August 13, 2015, 03:05:55 PM »
I wouldn't consider myself "debt free" with a car loan and mortgage, but I do think, especially amongst the Ramsey crowd, that there is a huge tendency to (incorrectly) lump all debt together, no matter the interest rate.  Debt over 5% or so is important to pay off ASAP.  Debt under that, might as well just carry it to term, it's not really costing you too much to carry it.  Especially something like a car loan which is a fixed term, If I'm going to keep my car for 10+ years, does it really matter too much if I retire that 1.9% note in year 3 or year 5, as long as I'm investing?
"If I could get all the money back I ever spent on cars, I'd spend it on cars." - Nick Mason

jorjor

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Re: Overheard at Work
« Reply #10060 on: August 13, 2015, 03:08:09 PM »

The highly compensated definition is determined by the IRS. 

I got hit by that the first time I sold stock in my old company (stock options).  The company, at the time, didn't match.  I was then limited to 4% for the next year.

I made sure to schedule my sales after that to all fall in a single year.  My salary alone has never been high enough to be an HCE.  It was only the stock that put me over.

Eventually that company started matching, which removes the HCE issue.

Matching only helps to a certain extent.  Without looking it up again, I don't remember the exactly language, but despite matching, my wife can only contribute up to 10% of gross because she is an HCE.  IIRC, it has to do with the amount of employees participating and rate at which they contribute?  Maybe that last part is not right though.  Hard to remember.

I have done non-discrim testing for medical benefit plans and cafeteria plans, but have not directly done 401k testing. My best understanding of non-discrimination testing for 401k plans is as follows:

I can't remember if there is a test for amount of employees contributing or not (there is for discrimination testing of some benefits but not others).

Regardless, the most common for the 401k plan to fail are tests that compare the rate of contribution before match  and including match). In each case you compare the NHCE average deferral percentage to HCE average deferral percentage. The plan fails the test if:

If NHCE% < 2% then fail if HCE% > NHCE% X 2
If NCHE% 2-8% then fail if HCE% > NHCE% + 2%
If NHCE% > 8% then fail if HCE% > NHCE% X 1.25

The HCE definition is selected by the government. An HCE is someone who is a 5% or greater owner in the company or has a salary of $115,000 (number might have changed recently). There is discrimination testing for some health benefits that defines HCEs as anyone in the top 25% of earners in the company, and still others that test for "key employees" who are determined based on ownership and/or whether they are officers at the company.

There are plan designs that help lower the chance of failing the test that don't involve limiting contributions or refunding HCE contributions. For example, matching a decent amount gives NHCEs incentive to contribute. An employer making a separate non-matching contribution might limit non-mustachian HCE deferrals because they may feel they are "saving enough" with the matching. Of course, matching/contributing to 401ks is expensive too.
« Last Edit: August 13, 2015, 03:12:09 PM by jorjor »

Zaga

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Re: Overheard at Work
« Reply #10061 on: August 13, 2015, 07:08:56 PM »
I wouldn't consider myself "debt free" with a car loan and mortgage, but I do think, especially amongst the Ramsey crowd, that there is a huge tendency to (incorrectly) lump all debt together, no matter the interest rate.  Debt over 5% or so is important to pay off ASAP.  Debt under that, might as well just carry it to term, it's not really costing you too much to carry it.  Especially something like a car loan which is a fixed term, If I'm going to keep my car for 10+ years, does it really matter too much if I retire that 1.9% note in year 3 or year 5, as long as I'm investing?
That's why we still have the debt we do, it's at exactly 5%.  So we pay extra, but also invest to the max in the 401-K.

Nickyd£g

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Re: Overheard at Work
« Reply #10062 on: August 14, 2015, 06:18:55 AM »
At last, I can contribute to my favourite thread! Overheard this morning:

Co-worker A: what percentage do you contribute to your pension?  [we can put in up to 25% of our monthly salary, company matches up to 9%]
Co-worker B: Oh, I've never contributed, thinking about pensions is just too morbid!
Me: *Choking on my tea*

PS This is after Co-worker B talking about receiving her long service award, meaning she has been here over 15 years...
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Zamboni

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Re: Overheard at Work
« Reply #10063 on: August 14, 2015, 07:09:31 AM »
^Ouch!

I personally think it's more morbid to be eating cat food when I'm too old to work by anyone's standards, but to each his own.

The first company I worked for in a "real" job had a 15% cap on employee 401k contributions. So having no clue what to do I put in 10% once I was eligible (there was also a 6 month waiting period), then upped it to 12.5% and then 15% over the next two years when I got a raises. This was in the late 90's/early 2000's when stocks were really flat and bonds were doing a little better. I remember remarking to my boss about that and saying maybe I should switch to bonds, and he gave me the excellent advice to leave it aggressively in mostly stocks since I was so young. So, here's to you, awesome ex-boss, and pliable me who listened!

Even though it irks me a little bit now that they were in some sense screwing me out of upping it even more after that since I still was not hitting the IRS cap, older me is extremely pleased that younger, ignorant me did that basic step for myself. That relatively little bit of money that I put in their plan during the 5 years I worked there has tripled and turned into $120K while I was barely even paying attention.

Ghzbani

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Re: Overheard at Work
« Reply #10064 on: August 14, 2015, 11:13:43 AM »
At last, I can contribute to my favourite thread! Overheard this morning:

Co-worker A: what percentage do you contribute to your pension?  [we can put in up to 25% of our monthly salary, company matches up to 9%]
Co-worker B: Oh, I've never contributed, thinking about pensions is just too morbid!
Me: *Choking on my tea*

PS This is after Co-worker B talking about receiving her long service award, meaning she has been here over 15 years...

I had a family member more or less say the same thing for why they don't save to retire. She said she doesn't want to think about it because it makes her feel old and makes her think about the end of her life (she's in her late 40s now).

Off-topic a bit but I've heard similar arguments from people about several "old age" issues, like not getting a will made.

zephyr911

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Re: Overheard at Work
« Reply #10065 on: August 14, 2015, 11:54:35 AM »
I wouldn't consider myself "debt free" with a car loan and mortgage, but I do think, especially amongst the Ramsey crowd, that there is a huge tendency to (incorrectly) lump all debt together, no matter the interest rate.  Debt over 5% or so is important to pay off ASAP.  Debt under that, might as well just carry it to term, it's not really costing you too much to carry it.  Especially something like a car loan which is a fixed term, If I'm going to keep my car for 10+ years, does it really matter too much if I retire that 1.9% note in year 3 or year 5, as long as I'm investing?
That's why we still have the debt we do, it's at exactly 5%.  So we pay extra, but also invest to the max in the 401-K.
5% is a good rule of thumb. I personally try to keep it below 3% (average historic inflation), because it's arguably free at that level. Caveats do apply in some situations.
I will probably pay off my car loan (2.25%) to open up DTI space for rental mortgages next year. That DTI is an issue at all is supremely silly, with 250K NW and saving $4-5K monthly, but FICO is what it is, and I realize it's built around "conventional" spending models. So, I'll play their game and retire five figures on the left hand to free up six figures on the right.
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Goldielocks

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Re: Overheard at Work
« Reply #10066 on: August 14, 2015, 12:43:50 PM »

Relative:  "Tell me something about yourself that I won't find on your resume"
Interviewee:  "Ass-tat"

If I'm the interviewer (relative), my next step is to stand up, shake hands, thank the millennial for his time, and end the interview.  But maybe I'm just old fashioned that way.

I wouldn't trust someone who talks about their ass-tat in an interview for any job outside sex work or a tattoo parlor to interact with clients properly.

Oh. I misread that response to mean...  "I am an Ass-Tat"

LOL
Thanks for the clarification but same end result, eh?

ohyonghao

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Re: Overheard at Work
« Reply #10067 on: August 14, 2015, 03:07:20 PM »
I wouldn't consider myself "debt free" with a car loan and mortgage, but I do think, especially amongst the Ramsey crowd, that there is a huge tendency to (incorrectly) lump all debt together, no matter the interest rate.  Debt over 5% or so is important to pay off ASAP.  Debt under that, might as well just carry it to term, it's not really costing you too much to carry it.  Especially something like a car loan which is a fixed term, If I'm going to keep my car for 10+ years, does it really matter too much if I retire that 1.9% note in year 3 or year 5, as long as I'm investing?
That's why we still have the debt we do, it's at exactly 5%.  So we pay extra, but also invest to the max in the 401-K.
5% is a good rule of thumb. I personally try to keep it below 3% (average historic inflation), because it's arguably free at that level. Caveats do apply in some situations.
I will probably pay off my car loan (2.25%) to open up DTI space for rental mortgages next year. That DTI is an issue at all is supremely silly, with 250K NW and saving $4-5K monthly, but FICO is what it is, and I realize it's built around "conventional" spending models. So, I'll play their game and retire five figures on the left hand to free up six figures on the right.
If I ever had a car loan I think the car loan would be the exception for the 5% rule.  When you consider the increase in insurance cost due to the requirement for full coverage then you are losing out on more than just the low interest rate you are paying.  Pay it off as soon as possible, and reduce your coverage to liability only.

commodore perry

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Re: Overheard at Work
« Reply #10068 on: August 14, 2015, 05:48:41 PM »
Unfortunately, plans are in not required to provide a percentage of contribution that allows employees to reach the IRS limit.

Mine is capped at 40%, which doesn't quite let me contribute as much as I would like to. It's enough to max out the pre-tax limit, but not the post 86 portion. #mustachianProblems

my last company had a 20% max that you could put in 401k (I hit $ amount at lower % so no big deal), changed jobs in Jan this year and new company is 15%. At new hire orientation w/ HR I asked why the low %? I was asking more for the younger new hires (I'm more mid-career).

HR: 15% the IRS max
me: no it's not. IRS is $ max not percentage
HR: hmmm, no one could really afford to save more than 15%
me: of course they can; wifey and I always maxed out my 401 whether that was % when I was younger or $ amount
HR: I think the max is so high level executives can't put too much into 401k
me: no...they're limited to $ max too like everyone else; at 15% they probably hit $ max in about a week (fortune 500 company)
HR: we'll get back to you...a few days later: IRS max is 18% (not true) and we set to 15% due to blah blah policy
me: never mind

dragoncar

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Re: Overheard at Work
« Reply #10069 on: August 14, 2015, 06:18:10 PM »
Unfortunately, plans are in not required to provide a percentage of contribution that allows employees to reach the IRS limit.

Mine is capped at 40%, which doesn't quite let me contribute as much as I would like to. It's enough to max out the pre-tax limit, but not the post 86 portion. #mustachianProblems

my last company had a 20% max that you could put in 401k (I hit $ amount at lower % so no big deal), changed jobs in Jan this year and new company is 15%. At new hire orientation w/ HR I asked why the low %? I was asking more for the younger new hires (I'm more mid-career).

HR: 15% the IRS max
me: no it's not. IRS is $ max not percentage
HR: hmmm, no one could really afford to save more than 15%
me: of course they can; wifey and I always maxed out my 401 whether that was % when I was younger or $ amount
HR: I think the max is so high level executives can't put too much into 401k
me: no...they're limited to $ max too like everyone else; at 15% they probably hit $ max in about a week (fortune 500 company)
HR: we'll get back to you...a few days later: IRS max is 18% (not true) and we set to 15% due to blah blah policy
me: never mind

Highly compensated employee rule is real, although that should mean that they should limit contributions only by HCEs and have no limit for new hires:

Quote
the average contributions of highly compensated employees, as a group, cannot exceed the average contributions of nonhighly compensated employees, as a group, by more than about 2 percent

In addition to the 2 percent spread, the contributions of all HCEs as a group may not be more than two times the percentage of other employees' contributions.

Zaga

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Re: Overheard at Work
« Reply #10070 on: August 14, 2015, 06:56:54 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

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Re: Overheard at Work
« Reply #10071 on: August 14, 2015, 07:09:08 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

Well, my plan certainly doesn't qualify for said exemption.

jorjor

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Re: Overheard at Work
« Reply #10072 on: August 14, 2015, 07:49:38 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

This is true. Safe harbor contributions have to be 100% immediately vesting though, right? How common is that? Everywhere I have been/seen has had a vesting schedule.

Hedge_87

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Re: Overheard at Work
« Reply #10073 on: August 14, 2015, 07:55:52 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

This is true. Safe harbor contributions have to be 100% immediately vesting though, right? How common is that? Everywhere I have been/seen has had a vesting schedule.
As far as I know we are 100% immediately.
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jorjor

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Re: Overheard at Work
« Reply #10074 on: August 14, 2015, 09:18:17 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

This is true. Safe harbor contributions have to be 100% immediately vesting though, right? How common is that? Everywhere I have been/seen has had a vesting schedule.
As far as I know we are 100% immediately.

My last place was 3 years, but there was a merger and anyone who was employed at a legacy company became immediately vested in both the old and new 401k plans, so I got to keep my money when I left after 2 years.

My current company has a generous employer contribution, but the vesting schedule is 6 years, so I have a ways to go to lock it in. :(

MoonShadow

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Re: Overheard at Work
« Reply #10075 on: August 14, 2015, 10:02:53 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

Safe harbor is the most expensive way for a company to pass the non discrimination testing. My guess is the OPs company didn't want to shell out for that, so simply limited contributions instead. Maybe OP was an HCE?

For this particular diversion of the thread, I believe you may be referring to me.  So yes, I am a highly compensated employee.

dragoncar

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Re: Overheard at Work
« Reply #10076 on: August 14, 2015, 11:29:59 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

Safe harbor is the most expensive way for a company to pass the non discrimination testing. My guess is the OPs company didn't want to shell out for that, so simply limited contributions instead. Maybe OP was an HCE?

For this particular diversion of the thread, I believe you may be referring to me.  So yes, I am a highly compensated employee.

I think we're talking about commodore perry and his 15% max

commodore perry

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Re: Overheard at Work
« Reply #10077 on: August 15, 2015, 01:09:34 AM »
I was surprised how little HR knew about the reason for the 15% max (there were two HR people there). I guess not terribly surprising they don't get that question a lot. I've read so many times the "financial advice" that you should "stretch" to save 10% including employer max and then you'll only have to work until you're 65!

SweetLife

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Re: Overheard at Work
« Reply #10078 on: August 15, 2015, 05:11:13 AM »
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Zaga

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Re: Overheard at Work
« Reply #10079 on: August 15, 2015, 06:26:37 AM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

This is true. Safe harbor contributions have to be 100% immediately vesting though, right? How common is that? Everywhere I have been/seen has had a vesting schedule.
I'm not sure of all of the rules, I just knew there was a loophole. 

This does concern me because with one more raise DH will probably fall into HCE territory.  I really hope that his company's 3% free will count towards Safe Harbor, cause it would really stink to have to lower our 401-K contributions!  Well, we wouldn't have to lower really, but would have to switch to after tax which is less than ideal.  I will have to find out if the 3% that everyone gets is vested immediately.

dragoncar

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Re: Overheard at Work
« Reply #10080 on: August 15, 2015, 01:18:58 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

This is true. Safe harbor contributions have to be 100% immediately vesting though, right? How common is that? Everywhere I have been/seen has had a vesting schedule.
I'm not sure of all of the rules, I just knew there was a loophole. 

This does concern me because with one more raise DH will probably fall into HCE territory.  I really hope that his company's 3% free will count towards Safe Harbor, cause it would really stink to have to lower our 401-K contributions!  Well, we wouldn't have to lower really, but would have to switch to after tax which is less than ideal.  I will have to find out if the 3% that everyone gets is vested immediately.

Honestly, I've never heard of an employer that uses the safe harbor.  I guess there are some limited circumstances where they would, but I've only worked at places where everyone is pretty financially savvy.

My understanding is if there's HCE problem, they refund the money at the end of the year.

Taran Wanderer

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Re: Overheard at Work
« Reply #10081 on: August 15, 2015, 04:18:36 PM »
Wow, I finally understand why our company went to a 3% safe harbor many years ago.  Thanks!

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Re: Overheard at Work
« Reply #10082 on: August 15, 2015, 06:40:04 PM »
You guys are forgetting the Safe Harbor rules.  Any 401-K plan that offers a 100% match on the first 4% of contributions -OR- give 3% to the account of all employees whether they contribute or not is exempt from the IRS's discrimination testing.  No discrimination testing = no 401-K limit for HCE's.  (Well, other than the federal limit of course.)

This is true. Safe harbor contributions have to be 100% immediately vesting though, right? How common is that? Everywhere I have been/seen has had a vesting schedule.
I'm not sure of all of the rules, I just knew there was a loophole. 

This does concern me because with one more raise DH will probably fall into HCE territory.  I really hope that his company's 3% free will count towards Safe Harbor, cause it would really stink to have to lower our 401-K contributions!  Well, we wouldn't have to lower really, but would have to switch to after tax which is less than ideal.  I will have to find out if the 3% that everyone gets is vested immediately.

Honestly, I've never heard of an employer that uses the safe harbor.  I guess there are some limited circumstances where they would, but I've only worked at places where everyone is pretty financially savvy.

My understanding is if there's HCE problem, they refund the money at the end of the year.

Well now you have. My employer has a 3% safe harbor. The HCEs were limited bigtime without it. I'm not sure if it vests immediately (I'm pretty sure it doesn't) but without it I would never be able max out.

When they refund that money at the end of the year it increases your taxable income. Not good.

Also, our 3% safe harbor opens up a potential profit sharing contribution on top of the safe harbor. I took advantage of that in 2014 and plan to as long as I can.
Indecision may or may not be my problem.

Kriegsspiel

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Re: Overheard at Work
« Reply #10083 on: August 15, 2015, 06:55:08 PM »
SAFE HARBOR SOUNDS SUSPICIOUSLY LIKE COMMUNISM.

nobodyspecial

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Re: Overheard at Work
« Reply #10084 on: August 15, 2015, 07:32:09 PM »
SAFE HARBOR SOUNDS SUSPICIOUSLY LIKE COMMUNISM.
All taxation sounds like communism.
That's why all IRS agents secretly wear Che Guevara t-shirts underneath their suits

MgoSam

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Re: Overheard at Work
« Reply #10085 on: August 15, 2015, 10:09:41 PM »
SAFE HARBOR SOUNDS SUSPICIOUSLY LIKE COMMUNISM.
All taxation sounds like communism.
That's why all IRS agents secretly wear Che Guevara t-shirts underneath their suits

Also, they are required to keep a copy of the manifesto on their persons at all times.

LennStar

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Re: Overheard at Work
« Reply #10086 on: August 16, 2015, 12:57:21 AM »
SAFE HARBOR SOUNDS SUSPICIOUSLY LIKE COMMUNISM.
All taxation sounds like communism.
That's why all IRS agents secretly wear Che Guevara t-shirts underneath their suits
Huh? In communism there would be no taxes. Everone would own the means of production and produce what everyone needs out of their own free will, taxes would not be necessary.

Always the Americans with their garbled ideas of what communism is. Get that idiot McCarty out of your brain, please.

LeRainDrop

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Re: Overheard at Work
« Reply #10087 on: August 16, 2015, 08:48:56 AM »
SAFE HARBOR SOUNDS SUSPICIOUSLY LIKE COMMUNISM.
All taxation sounds like communism.
That's why all IRS agents secretly wear Che Guevara t-shirts underneath their suits
Huh? In communism there would be no taxes. Everone would own the means of production and produce what everyone needs out of their own free will, taxes would not be necessary.

Always the Americans with their garbled ideas of what communism is. Get that idiot McCarty out of your brain, please.

Methinks you need to re-read The Communist Manifesto.  Marx and Engels listed ten planks for "the most advanced countries," of which number 2 is:  "A heavy progressive or graduated income tax."

bsmith

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Re: Overheard at Work
« Reply #10088 on: August 16, 2015, 10:43:59 AM »
The Communist Manifesto was a brief "call to action" based on Marx's larger work, Capital. It was designed for the common worker to read and understand a practical mechanism to develop a communist economy. There is no money in a communist system. As stated above, everyone would own the means of production. If the government owns the means of production, then that is a socialist economy.

nobodyspecial

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Re: Overheard at Work
« Reply #10089 on: August 16, 2015, 10:51:37 AM »
Huh? In communism there would be no taxes. Everone would own the means of production and produce what everyone needs out of their own free will, taxes would not be necessary.
It sounds like that would mean big redundancies at the IRS - I can't see them going for that.

Benevolent Anteater

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Re: Overheard at Work
« Reply #10090 on: August 16, 2015, 11:48:38 AM »
Hi guys, new here, but have been reading/enjoying this thread for about a year and it always gives me a good laugh and the boost I need when I am having a bad day or need a little extra motivation to keep saving! Anyway, I never thought I would actually post here but a recent example that happened to me with a coworker was just so shocking and awe-inspiring that I feel compelled to post for the first time ever, I'm not sure if I should laugh, cry, or both...

A woman who works at our company and is 10+ years older than me (I am in my late 20s, she just turned 40) is constantly talking about how she 'lives check to check' but says it in an almost proud/badge of honor type way, or as if it is an inherent fact, i.e. 'I'm a Christian' or 'I'm South African' i.e. like an integral part of your being that cannot be changed. Other then that she seems like a fairly nice/intelligent person. We had a recent meeting about the 401k and she said she was skipping it, because 'I don't contribute to the 401k anyway, I don't have enough money.' After a few examples like this, she one day asked if she could borrow $5 because she 'didn't have enough money for gas to get back home from work' and seemed very upset about it so against my better judgement I gave her $5. The next week she asked if she could borrow $20 for 'food and gas' as she had overdrawn her bank account and had no other money, and I had to say no, especially since she hadn't paid me back for the $5, so would have been a foolish investment.

Anyway, to cut to the chase, I get a call one day asking if I can give her a ride to work on my way to the office because she was having car troubles. It's on my way anyway so I said sure. I get there and realize she lives with her parents still, so how is she so broke every week? The icing on the cake here turns out to be that the 'car troubles' turned out to be that her car, which she JUST leased, had been repossessed by the bank the night before and she was very upset about it. I asked why it got repossessed, and she informed me that since her insurance payments are over $600 a month, (which I would imagine is slightly more than her weekly check, just based on my own salary, even though I probably make more), she could no longer afford both the car payments AND the insurance payments. She borrowed money from friends and family to get the car back, and apparently has not come close to paying these people back yet.

 Low and behold, the week after was in another major crisis because the car insurance company was cancelling her policy for nonpayment. I asked her why doesn't she consider taking public transport to work, car pooling, or maybe even using a bike since she lives fairly close to the office and she looked at me like I was an alien, she wouldn't even consider this as an option and I should be thrown out for even suggesting it. To me, if you're spending probably over 50% of your salary on car payments plus insurance payments, I would rather just not work and not have the car! Why work so hard for something that is basically just a mechanism for getting you to that job?? I informed her that her car insurance payment alone was more than I pay for my mortgage every month, as I have just bought my first property (have a few small investment properties but this one is for me to live in) and she looked like she thought I was some sort of freak that I already own instead of rent/live with parents (keep in mind I didn't even mention that I have already purchased several other properties for income/investing purposes, I think that would have been a bridge too far). I don't understand how people can get themselves into these types of situations and then, even worse, not see the error of their ways!!!

Anyway, sorry for the long post but I figured you guys would appreciate this example and I really just needed to rant, because if I told people in real life they would just say something like 'well how can you blame her, it's hard to save money these days'. I think people just love to say that because it gives them an excuse/crutch for their own situation

psinguine

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Re: Overheard at Work
« Reply #10091 on: August 16, 2015, 11:52:19 AM »
A young guy I work with recently went through a breakup. The one shared asset that he and his ex have is a house. At no point where they married, they have no children together, and she has kicked him out. He isn't living there, the we're not together long enough to be considered common-law, for all intents and purposes he is completely severed from her. With, of course, the exception of this house that he is not permitted (by order from his ex) to return to.

Problem is that he's still paying the half the mortgage. When they got the place (about three months before the breakup) they had opted to go biweekly. One payment came out of his account and one out of hers. Of course now that he has been kicked out he wants to free himself of this mortgage payment. I can't blame him. I asked how he was intending on removing himself from the mortgage. Maybe just removing his bank information and letting them take all the payments out of her account?

"I'm going to declare bankruptcy."
"... sorry what?"
"Yeah I'm going to declare bankruptcy."
"Dude, you're 25. That's going to screw you over for the rest of your life."
"No it won't. My uncle declared bankruptcy and he got credit card offers in the mail a month later. He told me so."
"Did he mention that they raped and pillaged him on the interest rates?"
"Well no. But he said it was a good idea and I should do it."
"Seriously? At that point why don't you just let the bank forclose on the house?"
"Well I don't want to ruin my credit rating."

*distant sound of my logic circuits melting*

zephyr911

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Re: Overheard at Work
« Reply #10092 on: August 16, 2015, 11:54:32 AM »
*headdesk*
I am not a cog. I am an organizational lubricant.

Silverado

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Re: Overheard at Work
« Reply #10093 on: August 16, 2015, 07:53:18 PM »
Hi guys, new here, but have been reading/enjoying this thread for about a year and it always gives me a good laugh and the boost I need when I am having a bad day or need a little extra motivation to keep saving! Anyway, I never thought I would actually post here but a recent example that happened to me with a coworker was just so shocking and awe-inspiring that I feel compelled to post for the first time ever, I'm not sure if I should laugh, cry, or both...

sorry for the long post but I figured you guys would appreciate this example and I really just needed to rant, because if I told people in real life they would just say something like 'well how can you blame her, it's hard to save money these days'. I think people just love to say that because it gives them an excuse/crutch for their own situation

Really sounds like all her cash goes up her nose to me.

Making Cookies

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Re: Overheard at Work
« Reply #10094 on: August 16, 2015, 08:07:44 PM »
Heard a lulu tonight.

I've mentioned on here a couple of brothers I grew up with. One was laid off and almost simultaneously divorced. Currently living in his parents' basement. Other brother was never out of work but despite making relatively huge money ($75K+) he can't pay his bills so his parents pay his mortgage and other expenses. No clear reason that his income evaporates so. Not sure why the parents don't move basement dwelling son in with the other one so they can have their home back.

The quick assumption of the spendy son's habits would be drugs or excessive consumerism but there is no stuff to account for all the spending. His employer regularly drug tests b/c he drives a company vehicle for his employment. Maybe gambling?

Not to tell too much he has full benefits and pension at his job.

Recently he loses his license after a DUI. Employer makes allowances and now he is doing something different for the same employer. They are trying to help him out until he can straighten himself out.

Mutual friends see him halfway across the city driving his POV this past weekend. Driving without a license after a DUI....

I wonder what those two brothers will be doing when their parents can't pay their bills someday?

LeRainDrop

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Re: Overheard at Work
« Reply #10095 on: August 16, 2015, 08:57:34 PM »
Anyway, sorry for the long post but I figured you guys would appreciate this example and I really just needed to rant, because if I told people in real life they would just say something like 'well how can you blame her, it's hard to save money these days'. I think people just love to say that because it gives them an excuse/crutch for their own situation
Oh, man, your co-worker is deluding herself.  She can't even see that she's stuck in an absurd cycle.

penguinpace

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Re: Overheard at Work
« Reply #10096 on: August 16, 2015, 10:19:13 PM »
Another lurker finally poking my head into the conversation. I'll start with something less life-ruining, but still silly.

I work in electronics retail, so I see idiotic purchases on a daily basis, but today's was a doozy. Young guy comes in, takes several hours deliberating between two of the high-end laptops. He ends up with a >$1000 laptop (the more powerful $850 one was 1/4" too thick).

-it will be used to surf the internet and write papers
-I learned over the course of the sale that he already has a laptop faster than the one he bought. Presumably that one is also too thick.

He looks like money, nice clothes, expensive watch, etc. I figured this is a non-expense to him (or his parents), so whatever. Until I hear him explain to his friend "...no, it's coming out of student loans."

nobody123

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Re: Overheard at Work
« Reply #10097 on: August 17, 2015, 08:39:23 AM »
Not technically at work, but I was sitting in a restaurant having breakfast with my kids so my wife could have a few hours to herself.  We're seated next to a young lady and a slightly older looking man.  I am able to figure out that she is a recent college grad and will be starting her first "real" job soon.  Over the next 30 minutes, I hear him explaining fairly accurately how a 401(k) works, what mutual funds are, etc., and her asking intelligent questions in response.  I was actually happy to see a young person giving two craps about their future.  But then, she asked about what she should invest her 401(k) money in.  The guy's response made me cringe:

"Bonds are the safest, so invest in those.  Actually, the money market fund is the safest.  Just remember that if Vanguard or Fidelity is running your 401(k), they will limit you to their stuff, and they're big on index funds which are sort of safe, but won't get you the big returns.  So just put in enough to get the company match and then invest in some actively managed funds on your own so you can get a better return." 

Hopefully she is smart enough to do her own research.

MgoSam

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Re: Overheard at Work
« Reply #10098 on: August 17, 2015, 08:43:20 AM »
Not technically at work, but I was sitting in a restaurant having breakfast with my kids so my wife could have a few hours to herself.  We're seated next to a young lady and a slightly older looking man.  I am able to figure out that she is a recent college grad and will be starting her first "real" job soon.  Over the next 30 minutes, I hear him explaining fairly accurately how a 401(k) works, what mutual funds are, etc., and her asking intelligent questions in response.  I was actually happy to see a young person giving two craps about their future.  But then, she asked about what she should invest her 401(k) money in.  The guy's response made me cringe:

"Bonds are the safest, so invest in those.  Actually, the money market fund is the safest.  Just remember that if Vanguard or Fidelity is running your 401(k), they will limit you to their stuff, and they're big on index funds which are sort of safe, but won't get you the big returns.  So just put in enough to get the company match and then invest in some actively managed funds on your own so you can get a better return." 

Hopefully she is smart enough to do her own research.

I kinda wish you had jumped in there to give her some other advice, but I can completely understand not doing so.

nobody123

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Re: Overheard at Work
« Reply #10099 on: August 17, 2015, 08:57:48 AM »
I kinda wish you had jumped in there to give her some other advice, but I can completely understand not doing so.

Not my circus, not my monkeys.  I try to restrict my butting in to conversations and picking fights with strangers to interweb forums.