Author Topic: Cue the Annual Bonus Whine  (Read 15686 times)

DragonSlayer

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Cue the Annual Bonus Whine
« on: November 06, 2014, 06:25:29 AM »
Hubby works for a company that gives an annual bonus. Great! But the kicker is that it goes straight into employee's 401k's. No checks. Don't participate in the 401k? You don't get the bonus. Well, it's time for bonus distribution and the annual whine has begun.

"Why can't I have a check? I can't spend it if you put it in there!!!"
"I can't afford to participate in the 401k because I need all my money. Why can't I have a check???"
"This sucks. You can't tell me what to do with my money!!!"

I think it's a great idea. The company isn't going to be providing pensions, so this is their way of trying to provide a tiny bit for your old age and get you to participate, too. And hell, in this world that they provide a bonus at all is nothing short of a damn miracle. But can people be grateful? Nope. They must whine and bitch about the gift because they can't spend it right now!

What do you never hear during the annual whine? "But I've already reached the max contributions and this is going to cause me to go over. Can I just have a check?"

rocksinmyhead

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Re: Cue the Annual Bonus Whine
« Reply #1 on: November 06, 2014, 07:01:44 AM »
I think that's a great idea too! And ha- I wonder what DOES happen if you've already reached the max. Can they somehow make it some kind of extra employer match? Wouldn't that be awesome?

Philociraptor

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Re: Cue the Annual Bonus Whine
« Reply #2 on: November 06, 2014, 07:06:14 AM »
I think that's a great idea too! And ha- I wonder what DOES happen if you've already reached the max. Can they somehow make it some kind of extra employer match? Wouldn't that be awesome?

The max employer + employee contribution is like $53k, not likely to happen.  Any contributions directly from the employer (e.g. matching contributions) are not counted towwards personal contributions (limited to $17.5k in 2014, $18k in 2015).

rocksinmyhead

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Re: Cue the Annual Bonus Whine
« Reply #3 on: November 06, 2014, 07:22:42 AM »
I think that's a great idea too! And ha- I wonder what DOES happen if you've already reached the max. Can they somehow make it some kind of extra employer match? Wouldn't that be awesome?

The max employer + employee contribution is like $53k, not likely to happen.  Any contributions directly from the employer (e.g. matching contributions) are not counted towwards personal contributions (limited to $17.5k in 2014, $18k in 2015).

Yeah I meant reached the max personal contribution. I wasn't sure if the bonus would act like employee money deposited in there or like an employer match. So like I said, if it's possible to have it just be an employer match, then awesome!!

orbix

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Re: Cue the Annual Bonus Whine
« Reply #4 on: November 06, 2014, 07:52:01 AM »
I wasn't sure if the bonus would act like employee money deposited in there or like an employer match. So like I said, if it's possible to have it just be an employer match, then awesome!!

I don't think it'd be possible for it to not be counted as an employer contribution if it *has* to go into the 401k... That aside, I agree, this is an awesome approach for the company to take, and I love it!

Target2018

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Re: Cue the Annual Bonus Whine
« Reply #5 on: November 06, 2014, 08:01:51 AM »
My company also does it this way.  They put a "profit sharing" deposit into your 401K that is equivalent to generally around 4% of your income.  You cannot not get this, if you don't use the 401K they open an account for you and insert the money into some default investment based on your age.  We too hear people complain about the money going where it is hard to get at (I think that is the point).  This company contribution is not considered part of your annual employee maximum.

Louis the Cat

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Re: Cue the Annual Bonus Whine
« Reply #6 on: November 06, 2014, 09:22:52 AM »
What an awesome way to do a bonus! I want to be shocked that people would complain but, unfortunately...

mak1277

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Re: Cue the Annual Bonus Whine
« Reply #7 on: November 06, 2014, 09:35:08 AM »
I wouldn't really call that a bonus...It's an additional retirement contribution, and maybe I'm splitting hairs here, but I'd be upset too if someone said "yeah, you're getting a bonus but you can't touch it" (and probably it has vesting provisions too, right?).



MrBuckBeard

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Re: Cue the Annual Bonus Whine
« Reply #8 on: November 06, 2014, 09:42:13 AM »
Quote
Don't participate in the 401k? You don't get the bonus.

For those that, for whatever reason, don't have a 401(k) - I do see their view that not getting the "bonus" is unfair.  After all, they've worked at the company to it's betterment, same as the person next to them.  The thing that would make this fair is if the "bonus" were put into a 401(k), even if this was the ONLY thing sitting in the 401(k) account.

Middlesbrough

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Re: Cue the Annual Bonus Whine
« Reply #9 on: November 06, 2014, 09:48:16 AM »
I wouldn't call it a bonus either, but rather profit sharing or something in that regard. The idea is to give money for the purpose retirement. A bonus, to me, is money given directly to you and can be directed to your desire.

slugline

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Re: Cue the Annual Bonus Whine
« Reply #10 on: November 06, 2014, 10:18:11 AM »
To me this is functionally a bonus unless you were not planning to contribute to your 401K in the first place. If you were planning to contribute $X and the employer later announces they would kick in $Y, then feel free to reduce your future contributions by $Y and go do whatever you want with that money.

In the end, a dollar is a dollar, right?

vivophoenix

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Re: Cue the Annual Bonus Whine
« Reply #11 on: November 06, 2014, 10:55:07 AM »
my company did "profit sharing"(bonus) as well. but they call it a some other weird thing= 'safe habour match' ,  but it was clear in the packet you received the day  one,   that it was going to be deposited into your 401k

i agree it is not a bonus. because it did not vest untill five years. so all in all it was another 401k contribution.
a bonus is something i can do whatever i want with,  it is extra cash in my pay check.

i kinda hate when people quibble. a freely given dollar is not a conditional dollar

if it were truly a bonus it wouldn't need a qualifier to explain that it is only into a 401k

however in our case it was given whether or not you actually contributed to your 401k.

they should encourage everyone to open an account so that they may still receive this bonus. and  this would not affect your annual max, as max contributions only deal with what you put in, not your employer.



« Last Edit: November 06, 2014, 10:56:51 AM by vivophoenix »

strider3700

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Re: Cue the Annual Bonus Whine
« Reply #12 on: November 07, 2014, 12:40:36 PM »
Unless the amount I be receiving was predefined I'd be upset getting a "bonus" put directly into a retirement plan as I budget around how much needs to go there.  Having a big lump sum drop in screws that up.  I'd rather get a cheque.    Having said that I have my doubts I'll be getting anything this christmas.


vivophoenix

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Re: Cue the Annual Bonus Whine
« Reply #13 on: November 07, 2014, 12:49:49 PM »
Unless the amount I be receiving was predefined I'd be upset getting a "bonus" put directly into a retirement plan as I budget around how much needs to go there.  Having a big lump sum drop in screws that up.  I'd rather get a cheque.    Having said that I have my doubts I'll be getting anything this christmas.



im confused,  how  does an extra employer-contribution to your 401k mess with your "budget"?

strider3700

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Re: Cue the Annual Bonus Whine
« Reply #14 on: November 07, 2014, 04:55:34 PM »
in my case I'm in canada and it's RRSPs or TFSA's we can put money into.   Both have a max contribution limit yearly and I max them out.   You're actually penalized for putting more then the allowed amount in and that fine can be pretty hefty.     I've never worked anywhere that would deposit directly to my RRSP/TFSA so I don't know what happens if they put it in but I'd be surprised if you can get around the contribution limits by getting extra from your employer.     Assuming that is the case then I'd have to hold back some of my savings until I know exactly how much the bonus is or isn't to prevent going over and that really screws with my really simple weekly invest X every thursday morning routine.
 

Dollarbill49

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Re: Cue the Annual Bonus Whine
« Reply #15 on: November 07, 2014, 05:18:27 PM »
I'm surprised at the Mustachians here who are a bit complainypants.  I thought a common strategy to get to FIRE is to invest any bonus.  What better way to do that than in a tax deferred vehicle.  Think about the extra one gets:  100% of the award/bonus/performance pay payout into the 401k versus something less (given mandated 25% fed taxes for bonus and possibly state taxes) if done outside of the 401k.  I would love to have this done at my company and I may just suggest this at our next retirement committee meeting.  Especially since I am a member of that committee.

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Re: Cue the Annual Bonus Whine
« Reply #16 on: November 07, 2014, 07:39:36 PM »
My new employer (as of 3 weeks ago) does something similar- they add 3% of your gross salary to your 401k at year's end, in addition to normal matching. As others have noted, it is subject to vesting at a rate of 20% per year. However, we are still eligible for regular bonuses every year as well. I just look at it as money, just like all the rest of my money. I'm certainly not going to complain about it. I did accept the job, after all.
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Jags4186

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Re: Cue the Annual Bonus Whine
« Reply #17 on: November 07, 2014, 08:25:51 PM »
If this was an actual "bonus" (say for hitting a sales goal) and 100% of it went into my 401k I would be annoyed too. If you make an average salary, maxing 401k and maxing Roth IRAs doesn't leave that much left to be saved/invested outside. If you're trying to save a down payment or accumulate taxable account savings it would be tough to do.

TN_Steve

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Re: Cue the Annual Bonus Whine
« Reply #18 on: November 07, 2014, 09:14:34 PM »
my company did "profit sharing"(bonus) as well. but they call it a some other weird thing= 'safe habour match' ,  but it was clear in the packet you received the day  one,   that it was going to be deposited into your 401k

i agree it is not a bonus. because it did not vest untill five years. so all in all it was another 401k contribution.
a bonus is something i can do whatever i want with,  it is extra cash in my pay check.

i kinda hate when people quibble. a freely given dollar is not a conditional dollar

if it were truly a bonus it wouldn't need a qualifier to explain that it is only into a 401k

however in our case it was given whether or not you actually contributed to your 401k.

they should encourage everyone to open an account so that they may still receive this bonus. and  this would not affect your annual max, as max contributions only deal with what you put in, not your employer.

Are you certain about the vesting?  By definition, safeharbor contributions MUST vest immediately.  Sometimes the SPD will have loose language in it regarding vesting schedules, but those schedules should only apply to employer contributions above and beyond the safeharbor.  (Even though this isn't my area of law practice, I was a trustee for a hundred person plan for several years....  Or, google "401k safe harbor vesting rules" and browse the results)

BTW, the idea behind safeharbor rules is that by giving the immediately vesting contributions to all employees, the Highly compensated folks are free to get the 53,000 (plus over 55 catch ups) without fear of antidiscrimination testing.  So, all in all, a win for everyone, which is the idea behind the safeharbor regulations.

vivophoenix

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Re: Cue the Annual Bonus Whine
« Reply #19 on: November 09, 2014, 09:24:17 AM »
my company did "profit sharing"(bonus) as well. but they call it a some other weird thing= 'safe habour match' ,  but it was clear in the packet you received the day  one,   that it was going to be deposited into your 401k

i agree it is not a bonus. because it did not vest untill five years. so all in all it was another 401k contribution.
a bonus is something i can do whatever i want with,  it is extra cash in my pay check.

i kinda hate when people quibble. a freely given dollar is not a conditional dollar

if it were truly a bonus it wouldn't need a qualifier to explain that it is only into a 401k

however in our case it was given whether or not you actually contributed to your 401k.

they should encourage everyone to open an account so that they may still receive this bonus. and  this would not affect your annual max, as max contributions only deal with what you put in, not your employer.

Are you certain about the vesting?  By definition, safeharbor contributions MUST vest immediately.  Sometimes the SPD will have loose language in it regarding vesting schedules, but those schedules should only apply to employer contributions above and beyond the safeharbor.  (Even though this isn't my area of law practice, I was a trustee for a hundred person plan for several years....  Or, google "401k safe harbor vesting rules" and browse the results)

BTW, the idea behind safeharbor rules is that by giving the immediately vesting contributions to all employees, the Highly compensated folks are free to get the 53,000 (plus over 55 catch ups) without fear of antidiscrimination testing.  So, all in all, a win for everyone, which is the idea behind the safeharbor regulations.


yes i am sure.
we had the matching the was based on our contributions, which vested immediately. but the safe harbor aka the profit sharing
did not vest.

i know because we were all laid off and i went through my packet with a fine toothed comb. maybe your job uses different langauge

vivophoenix

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Re: Cue the Annual Bonus Whine
« Reply #20 on: November 09, 2014, 09:26:36 AM »
in my case I'm in canada and it's RRSPs or TFSA's we can put money into.   Both have a max contribution limit yearly and I max them out.   You're actually penalized for putting more then the allowed amount in and that fine can be pretty hefty.     I've never worked anywhere that would deposit directly to my RRSP/TFSA so I don't know what happens if they put it in but I'd be surprised if you can get around the contribution limits by getting extra from your employer.     Assuming that is the case then I'd have to hold back some of my savings until I know exactly how much the bonus is or isn't to prevent going over and that really screws with my really simple weekly invest X every thursday morning routine.


oh i see. well in every job i have that gives out profit share contributions, you are either told exactly how much it is. or you are allowed to choose cash vs 401k

thepokercab

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Re: Cue the Annual Bonus Whine
« Reply #21 on: November 09, 2014, 01:32:52 PM »
If this was an actual "bonus" (say for hitting a sales goal) and 100% of it went into my 401k I would be annoyed too. If you make an average salary, maxing 401k and maxing Roth IRAs doesn't leave that much left to be saved/invested outside. If you're trying to save a down payment or accumulate taxable account savings it would be tough to do.

Agreed.  I make an average salary and with that I'm able to max out all of my tax deferred vehicles (HSA + Simple IRA), as well as max out my wife and I's IRAs. Beyond that though, since a lot of my paycheck is going into other vehicles it does start to become challenging to save after tax income. We've been able to save, but I'm planning also on using my upcoming bonus to complete the 20% downpayment we've been saving for the house we want to buy next year. 

Of course, most people just want the extra cash to buy shit now.  But some of us would want it for other opportunities.  Either way, not much to complain about, but I wouldn't begrudge someone who might want to choose how they want to receive it. 
« Last Edit: November 09, 2014, 01:36:17 PM by thepokercab »

SpicyMcHaggus

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Re: Cue the Annual Bonus Whine
« Reply #22 on: November 14, 2014, 12:11:31 PM »
I'm more upset that my bonus is all of 1%.   
0.65% after taxes....
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MooseOutFront

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Re: Cue the Annual Bonus Whine
« Reply #23 on: November 14, 2014, 01:12:55 PM »
My company does this with profit sharing and of course I love it.  I suspect it is also a tax advantage for the company compared to cutting a check.  I've never heard anyone complain about it though.

mlipps

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Re: Cue the Annual Bonus Whine
« Reply #24 on: November 15, 2014, 02:46:15 PM »
I'm surprised at the Mustachians here who are a bit complainypants.  I thought a common strategy to get to FIRE is to invest any bonus.  What better way to do that than in a tax deferred vehicle.  Think about the extra one gets:  100% of the award/bonus/performance pay payout into the 401k versus something less (given mandated 25% fed taxes for bonus and possibly state taxes) if done outside of the 401k.  I would love to have this done at my company and I may just suggest this at our next retirement committee meeting.  Especially since I am a member of that committee.

Yeah, I was disappointed that we couldn't put EXTRA from my husband's bonus into his 401k!!

vivophoenix

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Re: Cue the Annual Bonus Whine
« Reply #25 on: November 15, 2014, 02:50:51 PM »
I'm surprised at the Mustachians here who are a bit complainypants.  I thought a common strategy to get to FIRE is to invest any bonus.  What better way to do that than in a tax deferred vehicle.  Think about the extra one gets:  100% of the award/bonus/performance pay payout into the 401k versus something less (given mandated 25% fed taxes for bonus and possibly state taxes) if done outside of the 401k.  I would love to have this done at my company and I may just suggest this at our next retirement committee meeting.  Especially since I am a member of that committee.

Yeah, I was disappointed that we couldn't put EXTRA from my husband's bonus into his 401k!!

does being on this message board mean that everyone worships mmm as a god and takes each post as dogma?. or are people allowed to pick and choose what works best for them? aka is everyone on here automatically a mustachian?

mlipps

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Re: Cue the Annual Bonus Whine
« Reply #26 on: November 15, 2014, 03:11:13 PM »
I'm surprised at the Mustachians here who are a bit complainypants.  I thought a common strategy to get to FIRE is to invest any bonus.  What better way to do that than in a tax deferred vehicle.  Think about the extra one gets:  100% of the award/bonus/performance pay payout into the 401k versus something less (given mandated 25% fed taxes for bonus and possibly state taxes) if done outside of the 401k.  I would love to have this done at my company and I may just suggest this at our next retirement committee meeting.  Especially since I am a member of that committee.

Yeah, I was disappointed that we couldn't put EXTRA from my husband's bonus into his 401k!!

does being on this message board mean that everyone worships mmm as a god and takes each post as dogma?. or are people allowed to pick and choose what works best for them? aka is everyone on here automatically a mustachian?

Ha. I think that's a loaded question around here. There seem to be people in both camps. I don't think is about dogma though, just surprised that people would be disappointed by free money. I see the point though that it's a little unfair to characterize it as a bonus, but I'd rather just put it all in our 401k since we already have enough money to live off of without it.

Self-employed-swami

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Re: Cue the Annual Bonus Whine
« Reply #27 on: November 15, 2014, 08:15:56 PM »
in my case I'm in canada and it's RRSPs or TFSA's we can put money into.   Both have a max contribution limit yearly and I max them out.   You're actually penalized for putting more then the allowed amount in and that fine can be pretty hefty.     I've never worked anywhere that would deposit directly to my RRSP/TFSA so I don't know what happens if they put it in but I'd be surprised if you can get around the contribution limits by getting extra from your employer.     Assuming that is the case then I'd have to hold back some of my savings until I know exactly how much the bonus is or isn't to prevent going over and that really screws with my really simple weekly invest X every thursday morning routine.

I'm also in Canada, and I've never heard of any companies doing anything directly with an RRSP or TFSA.  Any times I've ever received a bonus, it has been a cheque.
A small business-owning SWAMI working herself towards FI.

dividendman

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Re: Cue the Annual Bonus Whine
« Reply #28 on: November 18, 2014, 09:39:57 PM »
Um... the only way to get > 17500/yr into your 401k is through employer matching. I would, and now will, beg my employer to put my bonus into the 401k... imagine that, an extra 20k or whatever in my 401k! And later I can get that out with no (or very little) tax via convert to IRA then convert to Roth... I wouldn't complain.

Not only that but when I do get my bonus it looks nice on paper but then it's like 30% less due to tax. This way I get all that yummy delicious money working for me.

Anytime I can get more stuff tax deferred it feels awesome. Damn my employer for not doing this.

Undecided

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Re: Cue the Annual Bonus Whine
« Reply #29 on: November 18, 2014, 10:17:35 PM »
Um... the only way to get > 17500/yr into your 401k is through employer matching. I would, and now will, beg my employer to put my bonus into the 401k... imagine that, an extra 20k or whatever in my 401k! And later I can get that out with no (or very little) tax via convert to IRA then convert to Roth... I wouldn't complain.

Not only that but when I do get my bonus it looks nice on paper but then it's like 30% less due to tax. This way I get all that yummy delicious money working for me.

Anytime I can get more stuff tax deferred it feels awesome. Damn my employer for not doing this.

No, a 401(k) can permit after-tax employee contributions as well as the deferral, so one could put $17,500 in as the deferral and $34,500 as an after-tax contribution.

dividendman

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Re: Cue the Annual Bonus Whine
« Reply #30 on: November 18, 2014, 11:04:11 PM »
Um... the only way to get > 17500/yr into your 401k is through employer matching. I would, and now will, beg my employer to put my bonus into the 401k... imagine that, an extra 20k or whatever in my 401k! And later I can get that out with no (or very little) tax via convert to IRA then convert to Roth... I wouldn't complain.

Not only that but when I do get my bonus it looks nice on paper but then it's like 30% less due to tax. This way I get all that yummy delicious money working for me.

Anytime I can get more stuff tax deferred it feels awesome. Damn my employer for not doing this.

No, a 401(k) can permit after-tax employee contributions as well as the deferral, so one could put $17,500 in as the deferral and $34,500 as an after-tax contribution.

D'oh. You're right. I meant pre-tax!

rocksinmyhead

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Re: Cue the Annual Bonus Whine
« Reply #31 on: November 19, 2014, 10:11:29 AM »
Not only that but when I do get my bonus it looks nice on paper but then it's like 30% less due to tax. This way I get all that yummy delicious money working for me.

so true! if we got our bonuses as employer contributions to 401K, it would be soooo much money!!

that said, I'm also saving for a wedding and a down payment right now in addition to maxing out my 401K, so getting bonuses thrown in there would definitely make those savings go more slowly.

seanc0x0

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Re: Cue the Annual Bonus Whine
« Reply #32 on: November 19, 2014, 05:30:26 PM »
in my case I'm in canada and it's RRSPs or TFSA's we can put money into.   Both have a max contribution limit yearly and I max them out.   You're actually penalized for putting more then the allowed amount in and that fine can be pretty hefty.     I've never worked anywhere that would deposit directly to my RRSP/TFSA so I don't know what happens if they put it in but I'd be surprised if you can get around the contribution limits by getting extra from your employer.     Assuming that is the case then I'd have to hold back some of my savings until I know exactly how much the bonus is or isn't to prevent going over and that really screws with my really simple weekly invest X every thursday morning routine.

I'm also in Canada, and I've never heard of any companies doing anything directly with an RRSP or TFSA.  Any times I've ever received a bonus, it has been a cheque.

It may be something that happens at places with a DCPP, but I don't see how it could work with an RRSP, other than not withholding taxes on the bonus. Not sure the gov't would like that, though. Certainly, my job (with DCPP) just pays out any bonuses, though thanks to the way compensation is handled, management uses the merit money as a way to give high-paid employees "raises" rather than recognizing merit.

frugalnacho

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Re: Cue the Annual Bonus Whine
« Reply #33 on: November 19, 2014, 07:37:51 PM »
Um... the only way to get > 17500/yr into your 401k is through employer matching. I would, and now will, beg my employer to put my bonus into the 401k... imagine that, an extra 20k or whatever in my 401k! And later I can get that out with no (or very little) tax via convert to IRA then convert to Roth... I wouldn't complain.

Not only that but when I do get my bonus it looks nice on paper but then it's like 30% less due to tax. This way I get all that yummy delicious money working for me.

Anytime I can get more stuff tax deferred it feels awesome. Damn my employer for not doing this.

But if you have the option to choose a check or have it go into your 401k, won't that still count against your 17.5k limit?  How can it count as an employer contribution if it's your money and you voluntarily choose to defer it into your 401k?

On a related note I will be maxing out my 401k and would also love to get my bonus dumped straight into my 401k as an employer contribution so it doesn't count against my 17.5k limit.  Is there a way to do that, other than have my employer make all bonuses go into 401k without the option for a check (coworkers would never go for this)?

dividendman

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Re: Cue the Annual Bonus Whine
« Reply #34 on: November 19, 2014, 08:27:40 PM »


But if you have the option to choose a check or have it go into your 401k, won't that still count against your 17.5k limit?  How can it count as an employer contribution if it's your money and you voluntarily choose to defer it into your 401k?

On a related note I will be maxing out my 401k and would also love to get my bonus dumped straight into my 401k as an employer contribution so it doesn't count against my 17.5k limit.  Is there a way to do that, other than have my employer make all bonuses go into 401k without the option for a check (coworkers would never go for this)?

I was just thinking out loud. I don't know how the employer side of 401ks work actually. Does anyone know that or is there a thread on that? Maybe I'll ask in the ask a Mustachian forum. If there was some way to get compensation optionally as an employer 401k match I would definitely like to know... I wonder why this isn't already the case... does contributing to a 401k cost the employer more or something? Hrm.

BlueHouse

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Re: Cue the Annual Bonus Whine
« Reply #35 on: November 19, 2014, 08:47:50 PM »


But if you have the option to choose a check or have it go into your 401k, won't that still count against your 17.5k limit?  How can it count as an employer contribution if it's your money and you voluntarily choose to defer it into your 401k?

On a related note I will be maxing out my 401k and would also love to get my bonus dumped straight into my 401k as an employer contribution so it doesn't count against my 17.5k limit.  Is there a way to do that, other than have my employer make all bonuses go into 401k without the option for a check (coworkers would never go for this)?

I was just thinking out loud. I don't know how the employer side of 401ks work actually. Does anyone know that or is there a thread on that? Maybe I'll ask in the ask a Mustachian forum. If there was some way to get compensation optionally as an employer 401k match I would definitely like to know... I wonder why this isn't already the case... does contributing to a 401k cost the employer more or something? Hrm.
Employers can absolutely decide to give you your bonus as a 401k profit-sharing contribution rather than directly to you as a bonus and it counts as employer contribution, so it doesn't interfere with your employee-side limit of 17.5k.  The only catch is that what's done for one employee must be done for all and this is an option that is set up in advance.  So all the complainypants who whine about not getting their bonus because it goes straight to 401k probably ruin it for the rest of the people.   
Also, I've never really worked anywhere with bonuses and so it always surprises me when people "expect" a bonus or consider it "their money".  It's not yours until it's in your hands and just because it has happened every other year, doesn't mean it will happen this year.   I'm sure my opinion would change if I ever actually got a bonus and I would start to feel entitled to it. 
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Alabaster

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Re: Cue the Annual Bonus Whine
« Reply #36 on: November 19, 2014, 09:35:02 PM »
Nope. I'm with the whiners on this one. If I'm going to support drugs, alcohol, gambling, ect. being legal on the principle that people have to be allowed to make their own choices, I can't very well think its a good idea for companies to decide what happens to a bonus. Give it to the employees. Let them screw up their lives if that's what they want.


If you want to give people a annual profit sharing stipend, be upfront about it and call it thusly. Don't call it a bonus if it isn't directly earned and supposed to be a nice extra for employee to do with as they choose.

rocksinmyhead

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Re: Cue the Annual Bonus Whine
« Reply #37 on: November 20, 2014, 07:23:27 AM »
Also, I've never really worked anywhere with bonuses and so it always surprises me when people "expect" a bonus or consider it "their money".  It's not yours until it's in your hands and just because it has happened every other year, doesn't mean it will happen this year.   I'm sure my opinion would change if I ever actually got a bonus and I would start to feel entitled to it.

I've only worked for my current company for 3 years, and I definitely wouldn't say I feel ENTITLED to a bonus, but I will say that I and everyone else I work with would be UNBELIEVABLY SHOCKED if we got absolutely no bonus. honestly I would assume the company was about to go under.

frugalnacho

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Re: Cue the Annual Bonus Whine
« Reply #38 on: November 20, 2014, 07:35:16 AM »
Also, I've never really worked anywhere with bonuses and so it always surprises me when people "expect" a bonus or consider it "their money".  It's not yours until it's in your hands and just because it has happened every other year, doesn't mean it will happen this year.   I'm sure my opinion would change if I ever actually got a bonus and I would start to feel entitled to it.

I've only worked for my current company for 3 years, and I definitely wouldn't say I feel ENTITLED to a bonus, but I will say that I and everyone else I work with would be UNBELIEVABLY SHOCKED if we got absolutely no bonus. honestly I would assume the company was about to go under.

I think everyone in my company feels entitled to a bonus, and bonuses are handed out on a yearly basis.  My company pays a little less than industry standard, and it's made up in the form of bonuses, so I don't really consider it a "bonus" so much as getting my fair wage.  If bonuses were withheld I would look for a higher paying job.

Undecided

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Re: Cue the Annual Bonus Whine
« Reply #39 on: November 20, 2014, 10:59:00 AM »
Also, I've never really worked anywhere with bonuses and so it always surprises me when people "expect" a bonus or consider it "their money".  It's not yours until it's in your hands and just because it has happened every other year, doesn't mean it will happen this year.   I'm sure my opinion would change if I ever actually got a bonus and I would start to feel entitled to it.

I've only worked for my current company for 3 years, and I definitely wouldn't say I feel ENTITLED to a bonus, but I will say that I and everyone else I work with would be UNBELIEVABLY SHOCKED if we got absolutely no bonus. honestly I would assume the company was about to go under.

I think everyone in my company feels entitled to a bonus, and bonuses are handed out on a yearly basis.  My company pays a little less than industry standard, and it's made up in the form of bonuses, so I don't really consider it a "bonus" so much as getting my fair wage.  If bonuses were withheld I would look for a higher paying job.

There are industries or industry segments where a bonus is so close to being a part of standardized comp across competitors that it's hard to imagine employees at any one employee not feeling entitled to something. That something may rise and fall, but there's a de facto mutual understanding of employers and employees that in the absence of extreme circumstances (and I've worked through a couple of rounds of extreme circumstances) it will continue to be a substantial component.

Liberty Stache

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Re: Cue the Annual Bonus Whine
« Reply #40 on: November 20, 2014, 02:29:31 PM »
I'm in my first job that pays a bonus and I never realized that whining about bonuses is definitely a thing.

My company is projected to underperform this year and only pay ~75% of the stated bonuses. Everyone around me starts to instantly complain that they are aren't getting the full bonus. The real funny part is at my level bonus are typically 5-7% of your base salary. At most we are taking about a differential of a couple grand for someone who makes 6-figures. This was discussed over a company paid lunch. It blows my mind.
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Cheddar Stacker

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Re: Cue the Annual Bonus Whine
« Reply #41 on: November 20, 2014, 03:51:21 PM »


But if you have the option to choose a check or have it go into your 401k, won't that still count against your 17.5k limit?  How can it count as an employer contribution if it's your money and you voluntarily choose to defer it into your 401k?

On a related note I will be maxing out my 401k and would also love to get my bonus dumped straight into my 401k as an employer contribution so it doesn't count against my 17.5k limit.  Is there a way to do that, other than have my employer make all bonuses go into 401k without the option for a check (coworkers would never go for this)?

I was just thinking out loud. I don't know how the employer side of 401ks work actually. Does anyone know that or is there a thread on that? Maybe I'll ask in the ask a Mustachian forum. If there was some way to get compensation optionally as an employer 401k match I would definitely like to know... I wonder why this isn't already the case... does contributing to a 401k cost the employer more or something? Hrm.

Behold:
old thread of mine

The best part about the strategy is you never pay any FICA tax. The key phrase in the linked post is "Safe Harbor Rules". If you don't have a safe harbor plan you can't do what I proposed. In about a month I will be executing this strategy. The other key thing is it can't really be phrase as "a contribution instead of a wage", it just has to be an employer contribution, otherwise it's considered an employee contribution.

I almost posted a long winded reply to this thread yesterday but it sounded a bit too...I don't know...technical maybe? so I deleted it. 

Summary of the deleted/never posted reply:
If you are eligible for a 401k plan you can't be discriminated against (at least not much) in regards to employer contributions, even if you don't participate by contributing. Something is off about the situation posted in the opening post above. Either we are missing facts, or they are doing something that would disqualify their plan in an ERISA/DOL audit.

Edit: fixed the jacked up link
« Last Edit: November 20, 2014, 06:02:40 PM by Cheddar Stacker »
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frugalnacho

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Re: Cue the Annual Bonus Whine
« Reply #42 on: November 20, 2014, 04:09:39 PM »
So if we are not part owner we can't take advantage of that option?

Cheddar Stacker

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Re: Cue the Annual Bonus Whine
« Reply #43 on: November 20, 2014, 05:56:33 PM »
So if we are not part owner we can't take advantage of that option?

No, that's not what I wrote. Here are some questions. If you answer yes, keep going. If you answer no, stop and forget about this strategy.

1) Do you have a 401k?
2) Does your 401k include a safe harbor contribution (automatic contribution no matter what you do)? If not do you have any influence with the decision maker where you work to be able to enact a safe harbor plan?
3) Do you work at a company that is either relatively small or with flexible benefit options?
4) Are the owners of your company interested in a nice tax avoidance strategy for the company and their employees?

If you answered yes to #4 you can likely pull this off. Strong employee benefits and relatively low wages can do wonders for corporate and individual tax bills.
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frugalnacho

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Re: Cue the Annual Bonus Whine
« Reply #44 on: November 20, 2014, 06:27:55 PM »
So if we are not part owner we can't take advantage of that option?

No, that's not what I wrote. Here are some questions. If you answer yes, keep going. If you answer no, stop and forget about this strategy.

1) Do you have a 401k?
2) Does your 401k include a safe harbor contribution (automatic contribution no matter what you do)? If not do you have any influence with the decision maker where you work to be able to enact a safe harbor plan?
3) Do you work at a company that is either relatively small or with flexible benefit options?
4) Are the owners of your company interested in a nice tax avoidance strategy for the company and their employees?

If you answered yes to #4 you can likely pull this off. Strong employee benefits and relatively low wages can do wonders for corporate and individual tax bills.

yes
yes (auto 3%)
yes (11 employees)
probably, although i'm not sure how many employees would want this.  I believe the 2 owners, and one project manager probably max out their 401k along with me.  I think the other 7 employees have no interest in 401k and I would be surprised if any of them contribute more than 10%.

So how do I go about getting my bosses to implement this, as I will be getting a bonus next month and will already have maxed my IRA and 401k?

expatartist

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Re: Cue the Annual Bonus Whine
« Reply #45 on: November 20, 2014, 07:02:44 PM »
What a great option for investing your bonuses! Ours are guaranteed as long as we don't flee the country before our 2-year contracts end. The end-of-contract bonus is taxed at a significantly lower rate than our salaries, don't know why. Mysterious Chinese taxation system.

Looking forward to getting it...in 2016 o.O
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Cheddar Stacker

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Re: Cue the Annual Bonus Whine
« Reply #46 on: November 20, 2014, 08:12:34 PM »
So how do I go about getting my bosses to implement this, as I will be getting a bonus next month and will already have maxed my IRA and 401k?

You sound like the perfect candidate then. Go to your smartest/most logical boss tomorrow. Lead off the conversation with something like: "I think I have a way to save the company, you, and I some taxes." Tell him you believe your safe harbor contribution of 3% opens up a gateway for elective contributions in excess of 3% (mine allows for up to 9% total) and you would like to discuss with him and your 401k administrators the possibility of you getting this excess contribution as part of your total compensation package this year. (Aka, in exchange for part/all ofyour bonus, but don't officially document it as such, and don't tell this to the 401k administrator because it irrelevant, all they need to know is boss 1&2, and frugalnacho all get an extra 6%).

Younger people, including me, have another hurdle. These contributions are an allowable, elective disriminatory contribution. This means you are allowed to discriminate but only a little. They test this excess benefit for the value of the benefit when you reach 59.5. So if you are 55 and you get $5k, no sweat, but if you are 30 and get $5k that's worth like $50 or something. The 401k administrator knows all the rules and will tell you what you can and can't do.

Good luck. If it works you could be a hero to the bosses. Or maybe they already do it and don't want you to know about it. But it will save them payroll tax so they should be all for it.
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frugalnacho

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Re: Cue the Annual Bonus Whine
« Reply #47 on: November 20, 2014, 08:27:02 PM »
I will discuss it with him and update tomorrow.

Cheddar Stacker

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Re: Cue the Annual Bonus Whine
« Reply #48 on: November 20, 2014, 08:36:11 PM »
One other drawback-you won't get the $ right away. They don't have to make this contribution until they file their tax return, including extensions. Our safe harbor contribution typically hits in may/june. Whenever yours normally hits, that's when you would receive it. This is additional incentive for mgmt to like it though. Cash flow deferral is a plus for them.
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dividendman

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Re: Cue the Annual Bonus Whine
« Reply #49 on: November 20, 2014, 09:13:53 PM »
I want!!! Too bad I work for MegaCorp where we can't change anything :(