1005. Is your company "returning" your retirement savings? In this episode, Laura answers a listener question from Jay P., who is frustrated that his contributions keep getting bounced back as taxable income.
If you’re a high earner or a diligent saver, nothing is more frustrating than seeing your hard-earned 401(k) contributions returned to your checking account. But why does the IRS penalize you just because your coworkers aren’t saving enough?
In this episode, Laura breaks down the "Highly Compensated Employee" (HCE) rules and explains exactly why your retirement plan might be failing its annual nondiscrimination tests. More importantly, she shares the specific steps you can take to keep your momentum going even when your workplace plan hits a ceiling.
Laura goes over:
- The HCE Threshold: The specific 2026 income and ownership limits that trigger these IRS rules.
- The "Safe Harbor" Solution: How to pitch a plan upgrade to your HR department that eliminates testing forever.
- Tax Fallout: How to handle the tax liability of returned pre-tax vs. Roth contributions.
- Pivot Strategies: Three powerful "Plan B" accounts—including HSAs and Roth IRAs—to house your returned cash so it stays invested for the long haul.
Find a transcript here.
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