401K Contribution

Hi Sage,

I have an employee who wants to contribute 100% of his bonus to his 401K.  The FICA taxes calculate on the full amount, so I reduced the contribution by the  FICA taxes and now it calculates a state tax, which there shouldn't be a state tax against it. Any suggestions

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  • Does your plan allow for changes at any point like this and on specific types of wages? Most plans dictate when an employee is allowed to change their deferral and what wages the deferral is calculated on. For instance, our plan just allows deferrals to be changed quarterly. Also, it doesn't differentiate between wages and bonus pay, they're both just wages in our plan so there wouldn't be a way for an employee to defer a specific amount just on bonus pay. 401k plans are fairly customizable, so it could be your plan does allow this type of action. Just something to check.

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  • Does your plan allow for changes at any point like this and on specific types of wages? Most plans dictate when an employee is allowed to change their deferral and what wages the deferral is calculated on. For instance, our plan just allows deferrals to be changed quarterly. Also, it doesn't differentiate between wages and bonus pay, they're both just wages in our plan so there wouldn't be a way for an employee to defer a specific amount just on bonus pay. 401k plans are fairly customizable, so it could be your plan does allow this type of action. Just something to check.

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