UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next
Author: TMFPixy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76418  
Subject: Re: Any guesses? Date: 8/30/1998 10:22 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Greetings, Bob, and welcome. You asked:

Our retirement plan is changing soon. We are told that the changes are required to maintain qualified status (in light of other changes that are to be made), but for the life of me, I can't figure out why. The details follow:

I'm an employee of a law firm that's structured as a limited liability partnership, with both equity and non-equity partners. The statute says I'm a "highly compensated employee," although my wife might disagree. We have a 401(k) plan to which we can contribute 10% or $10k, which I understand to be the statutory maximum. In addition, for the moment, we have an additional, mandatory, 3% contribution, which permits us to exceed what would otherwise be the limit.

That additional, mandatory, contribution is going away next year. We are told that this is a consequence of a change being made to the partnership's retirement plan, and I've tried to figure out how the one could affect the other, but it's a pozzlement to me. Any (educated) guesses?


That 3% mandatory contribution is probably one the firm must make because your plan is considered "top heavy". A plan becomes top heavy when more than 60% of the benefits go to key employees. When that happens, the firm must make that 3% mandatory contribution to all the other employees. That gets expensive, so that's almost certainly why your firm is changing the plan. By changing the plan, the firm can ensure it's no longer top heavy and the 3% mandatory contribution will disappear.

Regards……..Pixy
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev | Next

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
Foolanthropy 2014!
By working with young, first-time moms, Nurse-Family Partnership is able to truly change lives – for generations to come.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Macro Economics

Looking at Currency Ratios
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement