UnThreaded | Threaded | Whole Thread (26) | Ignore Thread Prev | Next
Author: DeltaOne81 Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: 401k problem Date: 11/29/2006 4:48 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 3
I have never been told that lump sum contributions are not allowed by law.

I dunno, I thought 401K contributions *had* to be payroll deductions. Section 401(k) of the tax code is under the section on 'deferred compensation'. Its not really 'deferred compensation' if you get it and then return it.

Specifically it says the plan is one...
"under which a covered employee may elect to have the employer make payments as contributions to a trust under the plan on behalf of the employee, or to the employee directly in cash;"

So it seems employer has to make the contribution (on your behalf), not you (of course I would not pretend to know that there isn't other wording of technicalities that make this interpretation wrong).


From a practical perspective, 401K contributions aren't a tax 'deduction' from your income per say, its that they aren't even listed in your gross income to begin with (for income tax purposes - i.e. W2 box 1). Its supposed to be money you never got.

So if you were to make a 'lump sum' contribution, your employer would need to know to subtract that out of your box 1 total wages. If that *is* legal (not reporting income that they paid you, but you then 'returned'), its certainly would be quite a hassle.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (26) | Ignore Thread Prev | Next


The Retire Early Home Page
Discussion on accelerating retirement day.
Post of the Day:
Value Hounds

Medallion Financial: TAXI!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.
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.