Getting around discrimination clause on 401K contributions?
I would like to take advantage of the increased employer contribution limit. I realize that my employer cannot change our plan for just some people. But what if it was for all employees? How creative can you set up these 401K plans?
For example, could my employer allow all employees to receive a percentage of their wages as contributions to their 401k up to the max employer contribution? There would not be a match involved. Just the ability for the employee to increase their 401k contribution and reduce their regular take home pay.
Also, I am under the understanding that if the employer gives you less traditional wages, they can save money in certain tax respects. Yes/no?
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Realistically the only companies that could have employees that max out the full 401K contribution limits of K are those where nearly all employees are highly compensated, and likely to be owners. This pretty much limits it to small, closely held businesses. I'd guess there are some mid-size companies that have it too, but I suspect they are rare.
Employer 401K contributions are not subject to FICA taxes, so extra 401K contributions in lieu of salary could be considered a tax savings for both the employee and employer, if the employee is willing to not touch that salary for many years.
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