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URL:  https://boards.fool.com/they-are-restricting-your-deposits-and-26398510.aspx

Subject:  Re: Taxes now that I don't have a mortgage. Date:  2/19/2008  6:07 PM
Author:  ptheland Number:  98869 of 131086

They are restricting your deposits and effectively forcing your to not be able to fund the maximum. I don't get it. Somethings missing....

That's probably a left-over from some older tax laws.

Some time back, 401k contributions were limited in the tax code to something like 15% or 20% of your earnings. That was in addition to the overall dollar limitation.

A number of years ago, Congress removed the percentage limitation, leaving only the dollar limit. But companies had to amend their 401k plans to allow the contributions over the statutory percentage. (That percentage HAD to be written into the plan, or it would not be a qualified plan.) Not all companies have removed that old limitation completely. Some left it in place, and others increased the percentage.

So this is a bit of an historical artifact left in some 401k plans.

--Peter
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