DH stumped payroll

[Unique User]

Not sure where to put this, but I got a good laugh out of it.  Since DH will be resigning in April, we set his 401k and catch up 401k percentages as high as they could go, 40% for each.   Well, it seems we broke the system because his company couldn’t figure out how to calculate his check so they did not withhold the 40% (or whatever was left) 401k, only the catch up.  He finally spoke with payroll today and had a funny conversation. 

Payroll: Well what percentage do you want withdrawn, your rate of 80% is more than you actually have available after insurance and ESPP deductions.   
DH: I’d like it to be whatever percentage will cause my check to be zero. 
Payroll: I don’t understand. 

The payroll lady finally understood and told him they had never run into this payroll complication before.  This is not a small company, they are a global company with 170k employees, surely he can’t be the first ever person to do something like this.  She then complimented him on his savings, said she would work it out and make sure he gets the 401k match he did not get before. 

[nancy33]

Nice! Our CPA couldn’t figure out my husband’s paystub once for the same reason

[Pizzabrewer]

When I first qualified for my company's 401k plan, I set my withholding at 60%.  This prompted a concerned email from payroll, asking that surely I meant 6%, right?

[Firehazard]

Pizzabrewer, that is understandable that payroll would want to confirm that.  I can tell you from experience that a 60% deferral to 401k is super rare!  Not among the population of MMM, but among the general population for sure.

[ysette9]

It seems the payroll software should just be able to sort it out. I currently have my 401k set to 100%. Clearly that isn’t actually happening as something is going to payroll taxes, but the system sorts it all out.

[Lucky13]

LOL yeah I'm going to quit in a few months and I'm glad my boss can't see my 401k contributions percentage or else he'd know something is up.

[LetItGrow]

I’m surprised also the system math didn’t work it out. But then again, someone had to set the limits in the code and certainly possible a low number was selected.

Awesome that they seem to be working in your favor, especially with the match.

[Not Sure]

I'm guessing that payroll could enter 1M for the contribution and the software would knock it down to whatever is available.

[Photograph 51]

I tried explaining to payroll that since I know how much I want to put into my 401K this year- $19,500, of course- they should just divide that by 26 and set that much aside each paycheck.  They are only willing to do percentages, since they aren't use to people maxing out.  So now i will have to make sure at the end of the year that I change the percentage as needed to come out exactly.

[Gone Fishing]

Wife and I had payroll scratching their heads on numerous occasions.  Pretty sure it helped her get laid off from a small company once.  Figured she didn't need the job if the was just investing it all!

Glad they are fixing the match!

[simonsez]

I tried explaining to payroll that since I know how much I want to put into my 401K this year- $19,500, of course- they should just divide that by 26 and set that much aside each paycheck.  They are only willing to do percentages, since they aren't use to people maxing out.  So now i will have to make sure at the end of the year that I change the percentage as needed to come out exactly.

Bummer!

We finally had a year* where the division was easy, too.  19.5k/26 = $750.

* 13k/26 is pretty easy as well but I was still in high school in 2004.

[kpd905]

I tried explaining to payroll that since I know how much I want to put into my 401K this year- $19,500, of course- they should just divide that by 26 and set that much aside each paycheck.  They are only willing to do percentages, since they aren't use to people maxing out.  So now i will have to make sure at the end of the year that I change the percentage as needed to come out exactly.

This is how my wife's account works, percentages only.  And I can't just max it out early because then she misses out on her match for all the paychecks for which she doesn't have a contribution.

[Photograph 51]

Yes, exactly.  I could afford to front load the payments for the year and then stop midway through the year once I've hit the limit, but I don't want to lose out on the match.  And they only do percentages in whole numbers, so right now I am slightly over.  If I get a raise this year (which I'm trying to show my employer i am deserving of), I will have to revise the percentage.  Fixed dollar amounts would be easier.

[moof]

My wife picked up a 6 month gig as a contractor about 20 months ago (still going).  We of course wanted to fill up the 401k for that year and the next ASAP not knowing when the gig would end.  She set the 401k percentage to 100%, which got a call to see if she meant $100.  They then protested that it had to be less than that due to FICA and such, so she clarified she wanted a $0 check.  They grumbled, but managed to figure it out.

[secondcor521]

I tried explaining to payroll that since I know how much I want to put into my 401K this year- $19,500, of course- they should just divide that by 26 and set that much aside each paycheck.  They are only willing to do percentages, since they aren't use to people maxing out.  So now i will have to make sure at the end of the year that I change the percentage as needed to come out exactly.

Most companies I worked for you could just set it to the next higher percentage and once you hit the limit they would contribute the max to the penny and then shut it off.  So if, for example, $19,500 equalled 14.23% of your paycheck, you could just do 15%, and sometime around Thanksgiving it would top off.

For those in the payroll purgatory where their company only matches if they contribute each pay period, then the math gets a little more complicated, but not very much more so.  IIRC what I used to do was do 16% until August or so, then do the math to figure out whether to drop it to 12% or 11% or 13% or whatever.

[rantk81]

My employer USED TO continue matching per paycheck throughout the year, even if you hit the IRS maximum/limit early.  This was awesome for a "front-loader" like myself.

The employer was acquired by another company, and the new way they do payroll is, they will only match on paychecks where the employee makes an actual contribution.  They then say that they will do a "true-up" in the following year for any matched amount that wasn't paid.  However, this usually doesn't happen until late Spring of the following year. And it's unclear if you will get the "true-up" if your employment ends prior to the true-up.

Employers can choose how they want to handle this.

In my situation, I always want to:
1) front-load as much as possible
2) definitely hit the IRS max/limit at the end of the year
3) account for any potential bonus or salary increase
4) avoid the risk of losing a true-up

It's not that hard. I just use a spreadsheet to model a sample of my 26 regular paychecks plus bonus.
I account for a modest/average salary increase, with an estimate of when those usually happen.
I front-load as much as possible in the first few paychecks of the year.
Then I ride-out the rest of the year at a 6% contribution rate (the amount I must contribute to get the full employer match) up until December.
I set it up so that I get very close to the IRS during December.
Then, in December, I crank up my 401k withholding to the maximum, so that my final paycheck in December will max out for the year. It also will begin the "Front-loading" in the next calendar year.

[Elle 8]

...

It's not that hard. I just use a spreadsheet to model a sample of my 26 regular paychecks plus bonus.

...

For those of you whose payday is Thursday, be aware that there are 53 Thursdays in 2020. I'm paid weekly so there are 53 paychecks this year. If you're paid biweekly, you could have 27 paychecks, depending if your first check of the year was 1/2 or 1/9.

Also, for people with Friday paydays, 1/1/2021 is a Friday and New Years Day. If your company pays a day early if the holiday falls on payday, you may have an extra paycheck in 2020 as well.

[The_Big_H]

I tried explaining to payroll that since I know how much I want to put into my 401K this year- $19,500, of course- they should just divide that by 26 and set that much aside each paycheck.  They are only willing to do percentages, since they aren't use to people maxing out.  So now i will have to make sure at the end of the year that I change the percentage as needed to come out exactly.

Most companies I worked for you could just set it to the next higher percentage and once you hit the limit they would contribute the max to the penny and then shut it off.  So if, for example, $19,500 equalled 14.23% of your paycheck, you could just do 15%, and sometime around Thanksgiving it would top off.

For those in the payroll purgatory where their company only matches if they contribute each pay period, then the math gets a little more complicated, but not very much more so.  IIRC what I used to do was do 16% until August or so, then do the math to figure out whether to drop it to 12% or 11% or 13% or whatever.

I have the exact same problem, and ended up just writing a whole excel spreadsheet to track my 26 paystubs w every line item.  Even built in the IRS W-4 equations to calc federal withholding.  It now calculates my estimated tax bill and refund, within a few bucks (I could make it exact adding in the bank account 1099, but not worth the trouble... always aim for a $250 refund.

I use that excel to set the W4 info AND what percentage to set the 401k at such that the check 26 it will put in enough to hit the max and be at least the match %.

Oh get a load of this too when I do mega-backdoor roth (after tax 401k) the investments have to be the same election as the pre tax :(  Also its a huge pain I have to call, mail in forms, and it takes like 2-3 weeks total.

[teen persuasion]

DH has been leading his HR on a merry dance, every year.

First year, he switched jobs in April, so he'd already made 401k contributions to the previous employer.  I figured out the correct percentage for his new employer, and let it run.  At the end of the year, he was almost $25 over the limit when we added both together (he had a tiny bit of extra pay here and there that I couldn't have predicted).  So we had to request the excess be returned.  HR had never done it before.

Next year, he hit the $19k cap mid December and contributions were stopped, but he's over 50, so we'd expected contributions to continue.  Obviously they subscribed to the separate buckets methodology, just like a previous employer.  Last minute scramble to get contributions restarted (and lost partial contribution when hit cap) before EOY.  Normally, changes are allowed only quarterly (!), and on paper forms (!!).  He got the form, brought it to me to make a choice of percentage for the catchup bucket - lo and behold, there is no option for this.  We'd done the forms (such as they were) correctly, they just ignored the possibility of someone contributing past the normal cap.  In talking with HR, there is ONE person who contributed into the catchup bucket - HR sat down with her and worked things out in person to get it right.  Ok, they fixed things for DH, too.

Current year, HR proudly contacts DH with their new and improved form, which now has a line for catchup contribution percentage, too.  Everyone is confused when I tell HR thanks, but no thanks.  We don't need that option this year.  What?  Why?  Well, last year in January I had no employer option for retirement savings, so we dumped everything in DH's 403b, 50% contribution.  In July, I got access to a SIMPLE IRA, so we switched to push as much as possible to mine, and the excess to his.  So we'd switched his to 20% for the last half year.  In January, I readjusted both, now 30% to his, which will no longer eclipse the standard cap.

Since I got the SIMPLE IRA mid year, and I'm part time, I put 100% (after FICA, paid Family Leave, etc.) to the SIMPLE IRA to get as much as possible in it.  The CPA who does our payroll figured that part out ok, surprisingly.  It took a bit of time and prodding to get her to back it down to 80% in January, though.  We'll see if she remembers to cut it off at the cap+catchup at the end of the year.

[savedandsaving]

LOL yeah I'm going to quit in a few months and I'm glad my boss can't see my 401k contributions percentage or else he'd know something is up.

I live for this kind of 'Staching Secrecy. That's not even FU money, more like "chuckle at everything because I'm so close" money. Congrats!

[dd564]

Sometimes the effort to go through this isn't worth the difference.

I set my 401k to get close, and if I'm a few hundred short end of year, it's not going to kill me.
It's not like the company is stealing that money.

[DaMa]

*snip

I have the exact same problem, and ended up just writing a whole excel spreadsheet to track my 26 paystubs w every line item.  Even built in the IRS W-4 equations to calc federal withholding.  It now calculates my estimated tax bill and refund, within a few bucks (I could make it exact adding in the bank account 1099, but not worth the trouble... always aim for a $250 refund.

This is why I love these boards.  It's the only place I find people who do the same things I do and consider them normal. 

Except I aimed to pay about $500.

[Brother Esau]

This would be good for the "Mustachian People Problems" (MPP) thread. :-)