Tax

Have a tax question? Ask a tax Expert

Ask an Expert,
Get an Answer ASAP!

I want to know whether I can negotiate my 401k contribution…

Customer Question
I want to know...

I want to know whether I can negotiate my 401k contribution or whether all employees have to have the same plan. Also, what counts as compensation in determining whether I’m a highly compensated employee and thus at risk of having my contributions limited? Is it just salary and bonus, or also employer 401k contributions and HSA contributions?

Submitted: 5 months ago.Category: Tax
Show More
Show Less
Ask Your Own Tax Question
Answered in 23 minutes by:
3/6/2018
Tax Professional: Lev, Tax Advisor replied 5 months ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,334
Experience: Taxes, Immigration, Labor Relations
Verified

You may choose the amount of employee elective deferral - that is deducted from your wages and contributed into 401k plan.

That will be your choice.

The maximum salary deferrals - $18,500 in 2018 ($18,000 in 2015 - 2017), plus $6,000 in 2015 - 2018 if the employee is age 50 or older.

However - employer's matching contribution is not negotiable - and is based on plan's documents - same rules are for all employees.

The maximum what the employee may contribute is 25% of compensation.

That percentage is set the same for all employees.

The compensation is also defined in plan documents - so you may want to verify.

Most employers are using Safe harbor 401(k) plans which are required to use a definition of compensation that complies with IRC Section 414(s).

Ask Your Own Tax Question
Tax Professional: Lev, Tax Advisor replied 5 months ago

.

Some definitions of compensation automatically satisfy IRC Section 414(s). For example, a definition of compensation that includes all compensation within the meaning of IRC Section 415(c)(3) and excludes all other compensation automatically satisfies IRC Section 414(s). See Reg. Section 1.414(s)-1(c)(2). A definition of compensation within the meaning of IRC Section 415(c), with certain permissible modifications, also satisfies IRC Section 414(s). See Reg. Section 1.414(s)-1(c)(3), (4) and (5).

In addition, a definition of compensation within the meaning of IRC Section 415(c)(3) modified to exclude certain amounts that would be includible in gross income but for an election by the employee (such as elective deferrals) satisfies IRC Section 414(s).

Finally, any other definition of compensation generally satisfies IRC Section 414(s) if the definition meets three criteria:

  1. it does not by design favor highly compensated employees,
  2. it is reasonable within the meaning of Reg. Section 1.414(s)-1(d)(2), and
  3. it satisfies the nondiscrimination requirement set forth in the regulations. See Reg. Section 1.414(s)-1(d).

Examples provided by the IRS.

  1. A safe harbor 401(k) plan defines compensation as Form W-2 wages (that is, the amount shown in an employee’s W-2, Box 1, Wages, tips, other compensation), less reimbursements, fringe benefits, moving expenses, and welfare benefits. This definition satisfies IRC Section 414(s) because it complies with Reg. Section 1.414(s)-1(c)(3).
  2. A safe harbor 401(k) plan excludes overtime and bonuses from the definition of compensation. The definition will satisfy IRC Section 414(s) if it (i) does not by design favor highly compensated employees, (ii) is reasonable within the meaning of Reg. Section 1.414(s)-1(d)(2), and (iii) satisfies the nondiscrimination requirement set forth in Reg. Section 1.414(s)-1(d)(3).

Questions?

Ask Your Own Tax Question
Was this answer helpful?

How JustAnswer works

step-image
Describe your issueThe assistant will guide you
step-image
Chat 1:1 with a tax professionalLicensed Experts are available 24/7
step-image
100% satisfaction guaranteeGet all the answers you need
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 33,334
33,334 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,338 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,512 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

PhillipsEsq.

PhillipsEsq.

Attorney-at-Law

59 satisfied customers

B.A., M.B.A, J.D.

Robin D.

Robin D.

Senior Tax Advisor 4

15,569 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,655 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

< Previous | Next >

Related Tax Questions
401k question on employer matching. Can you help? I am
I am frustrated because of the language used by the 401k experts. All I want is for the employer to contribute 10% of what the employee contributes. No limits, except for what the employee contributes, of course. Simple. But apparently not that simple. What is the formula that will apply to ALL employees? … read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
Second opinion] Is there an issue with Highly compensated
second opinion] Is there an issue with Highly compensated employee discrimination with HSA? If an employer has an individual who serves as medical director and a person who serves as a nurse can it be… read more
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®
IRS Enrolled Agent, CFP(R),
Master\u0027s Degree
2,609 satisfied customers
Can an employer contribute to an employees HSA account and
Can an employer contribute to an employees HSA account and if so is this tax deductible ? Also does the contribution have to be identical or proportional to all employees… read more
abci168
abci168
Principal
27 satisfied customers
I have another question. Can my Board establish just for me,
I have another question. Can my Board establish just for me, a 457 plan and contribute up to 10% of my annual income to it directly without having the money have to pass through my salary? Would this … read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
286 satisfied customers
I have an S-Corp which I am 100% Shareholder. My spouse is
I have an S-Corp which I am 100% Shareholder. My spouse is the only employee of my S-Corp. I have no plans on hiring other employees.How do I ensure Health Insurance Payments and HSA Contributions mad… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
I am a small business owner with 1 employee and have a solo
I am a small business owner with 1 employee and have a solo 401k account. Under this 401k, if my employee works 1000 hours or more in the year, I am obligated to give her a 401k contribution equal to … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
15,569 satisfied customers
I live in California. I do not own any property nor do I
I live in California. I do not own any property nor do I have any significant (other than 401kamf HSA/FSA$ investment activity planned for 2016. I'm trying to limit my tax exposure and optimize my ret… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
I have a small business LLC, S election and I have adopted a
I have a small business LLC, S election and I have adopted a solo 401K plan which has a profit sharing/Match options as well as a Roth component. what is the minimum compensation i need to pay myself … read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
, I am due a $50K bonus from work. I asked my employer if
Hi, I am due a $50K bonus from work. I asked my employer if he can deposit $25K into my 401K as an employer contribution and the remaining $25K as a salary. This way I will be able to deferred tax pay… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
Hi Lev, Question yesterday about Corp paying managers health
Hi Lev, Question yesterday about Corp paying managers health insurance. you stated the health insurance amount must be included in manager's wages. Could the Corp pay into an HSA for the manager and t… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
A client has a Section 125 plan. They also offer Health Savings
A client has a Section 125 plan. They also offer Health Savings Accounts. I need to know if they are subject to Comparability rules, as their 125 Plan does NOT allow employees to take cash in lieu of … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Hi Lev...its been awhile since we talked about SE401K...back
Hi Lev...it's been awhile since we talked about SE401K...back w a few more wrap-up questions... We haven't established SE 401K yet bec our CPA has said: no hurry...can keep my Gal's annual income 18K … read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
if a corporation reimburses employees for health insurance
if a corporation reimburses employees for health insurance premiums they have paid, is this taxable income to the employee?… read more
PDtax
PDtax
Owner
Master\u0027s Degree
1 satisfied customers
My payroll W-2 income is just below the 401k HCE dollar limit.
My payroll W-2 income is just below the 401k HCE dollar limit. My employer went to a high deductible medical plan with a $2,500 deductible. They set up an HSA for employees and contributed $2500 into … read more
jgordosea
jgordosea
Enrolled Agent
Bachelor's Degree
2,885 satisfied customers
My partner and I own and run 2 ice cream stores under 2 separate
My partner and I own and run 2 ice cream stores under 2 separate S corporations. Each of us earns $2000 monthly salary from each store (ie total salary/person from both stores is $4000) as small busin… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
Are employee HSA contributions taxable for social security?
Are employee HSA contributions taxable for Social Security and medicare but exempt for federal income tax withholding or are they exempt for all taxes?… read more
abci168
abci168
Principal
27 satisfied customers
C Corp HRA Question - I am the 100% owner of a small C Corp. - My
C Corp HRA Question: - I am the 100% owner of a small C Corp. - My wife and I are the only 2 employees. I am the President and she is the Online Marketing Manager. In case it is applicable, my wife is… read more
BK-CPA
BK-CPA
Bachelor's Degree
687 satisfied customers
Is it legal to pay a person a small salary to pay taxes and
Is it legal to pay a person a small salary to pay taxes and the rest of the money going into a 401(k)?… read more
Lev
Lev
Tax Advisor
Bachelor's Degree Equivalent
33,334 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x