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My point is, gaming the system is DISHONEST, and cause OTHERS to have problems. Do that makes you a certain kind of person, that wouldn't last long in my organization.

What kind of person do you want to be?


Where did I ever say I gamed the system or would be dishonest? In fact, I specifically said I self-limited my contributions in the one instance when I knew I could have gone over the limit and I would never lie to an employer about this topic, if they asked.

Your aspersions about me being dishonest are way off base, but don't worry, I probably wouldn't want to work in your organization very long, if at all, since you seem to be the kind of person who assumes the worst of people.

My point, which you didn't seem to get, was that plan administrators (like Fidelity) and employers (like my 9 employers), at least in my experience, DO NOT ask about prior contributions when an employee starts a new job. And given that more and more people have multiple jobs, and are starting side businesses where they may start solo 401(k)s, they probably should be asking every year, not just when the employee starts a new job. (Are you telling employers to ask this of all employees every year?)

And because most people DON'T understand that the limits are placed on the employee's contributions to all plans contributed to during the year (I didn't until several years after I started reading these boards, and there are multiple threads in these boards where people have shown that they don't understand these rules), these mistakes ARE happening.

The first point that many people figure this out is when they do their taxes, and the tax software pops up with a warning that they overcontributed, and will be charged tax on the overcontribution (assuming that it's a Traditional contribution). Even then, does the tax software tell them to notify their employer? (I don't know because, as I said, I self-limited, so I never got the warning.) And if it does, how many people are actually following through on that? Less than 100% of the people who got the warning, I'm sure. And if the overcontributions are to Roth accounts, is there even an extra tax involved? Since the Roth contributions have already been taxed, what's the remedy for excess Roth contributions, and will the tax software notify them of the overcontribution?

The IRS seems to be taking the stance that it's up to employees to notify their employers, rather than policing the issue themselves. At least, in 20 years, I've never seen anyone talk about getting a letter about excess 401(k) contributions on these boards, and I didn't find any instances by googling, either. (I did find lots of articles about how to correct the excess contribution, but never found anyone talking about getting a letter from the IRS about an excess 401(k) contribution.) Given that the IRS is the only one, other than the employees, who actually have enough information to know that there was an issue, the IRS is the only ones who could police this. (Even if administrators and employers ask, who's to say that they get the correct answers?) Which brings me back to my point of - if the IRS isn't policing this, there are excess contributions in plans right now, that employers don't know about, and won't be notified of by their employees. It could be because someone is 'gaming the system' and 'being dishonest', but in most cases, it's probably because of ignorance, IMO.

AJ
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