Okay I am lost how any of this makes any sense. I know there's a lot of arcane rules about 401ks and the term "highly compensated employee" pops up a lot in them, but I don't understand how you can "lose" the financial benefits because your income isn't high enough.
Look this was never an area of expertise for me, but this doesn't sound right. You should just hit a "wall" at some point, depending on how your plan is set up, where you simply can't shove any more money into the 401k. If the plan itself doesn't voluntarily set a lower limit than the IRS allows, at some point you're going to reach your $17,500 (or more if you're old enough to do "catch ups") limit.
It's not personal, there are limits built into these things. They're meant for average to low earners to have plenty of space to save in while not allowing the higher earning folks to save too much on the old tax bill.
The way this is supposed to work, the last time I checked, is that if Alice earns $200,000 and Bob earns $40,000 a year, and both contribute 43.75% (I'm fudging the numbers) into their 401k, Bob will keep saving $1458.33 every month of the calendar year give or take a penny here and there. At his savings rate and income, I've fudged an example where he can shove away money every month and never run out of "space".
Bob, like many of us, is just not well compensated enough to possibly have a problem with running out of tax advantaged space even if he's super Mustachian. If his kick ass 401k savings aren't enough, he can then start dumping money into a (probably Roth) IRA, and if that's still not enough, he can at least buy some I or EE bonds from Treasury Direct.
But Alice will be kicking in $7291.67 a month, that is until March, at which point if your payroll clerks and your software are worth a hoot, something will kick off and say "Nope, sorry Alice, you've hit the $17,500 mark already, no more saving for you." She probably makes too much money to open a Roth IRA the conventional way, and she can buy the bonds too but the limit on them is pretty low compared to how much she can save.
Not saying I am a fan of the current tax system but that is how it's supposed to work. Dillinger robbed banks because that's where the money was. Alice can't tax shelter nearly as much of her income, proportionally, as Bob can.
If anything since the maximum amount creeps up a little every year, you ought to see more (absolute) benefit from your 401k contributions if you're maxing it out. I also don't fathom how you suddenly become ineligible for the 401k unless it's some weird rule dealing with highly compensated employees or something like that that I don't know about, or how you're calculating the tax liabilities.
Am I just not understanding something here? It just sounds to me like you're kicking so much ass the retirement plan you have can't handle it. It's not personal, it's going to be something in place at any job.
I think someone in your office is explaining this to you badly. I think I am too, but I am guessing what's going on here behind the curtain.
Look into an IRA or tax deferred savings bonds or just buy some tax efficient investment (like a stock index fund) in a taxable account and call it a day is what I say, unless I am just not getting the situation here. Maybe this will help?
http://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement
