It’s March and I am approaching the $24,500 2026 limit for 401k contributions. People over 50 can contribute an additional $8000 however if you were classified as a highly compensated employee those contributions need to be made to a Roth IRA vs a deferred 401k contribution.
I called my 401k provider to understand my options and the person I spoke to was clueless. The rep told me that I wasn’t classified as a high income earner. I pointed out my salary, which she had access to review, and she did not know how to respond. This is a common problem these days with people unable to answer simple questions. I told her I would call back and speak to someone else.
Here is what the IRS says and here is the link.
The threshold used in the definition of “highly compensated employee” under section 414(q)(1)(B) remains $160,000.
Of course the rule looks at prior years income which was way over $160k and this year will be as well unless I quit my job before I reach that limit.
I don’t want to end up with tax issues at the end of the year so I will adjust my contributions manually once I get close to hitting the $24,500 limit.
I did check the 401k plan documents online and it seems the remedy to any issues is to move overages to the right form (Roth) or refund the money back so I think I’ll be fine.
Share The Wealth
Are you juicing your 401k to the max limit this year?