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Are they violating their fiduciary duties?

My company only allows me to put 2% into my 401k. They have no match so I have idea why they limit the contributions.

Jan 20, 2016 by James from Chicago, IL in  |  Flag
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Hello James, Unfortunately for you, it is up to the company's discretion as to what percent they allow their employees to contribute to a 401k. They may have a sound reason for their decision (i.e. You are a highly compensated employee and the plan is top heavy) or may simply have been given bad information. Either way, they are violating no law. However, I can imagine your frustration and it may make sense to sit down with HR or the CEO (if the company is smaller) and see if you can get to the bottom of things.

Good luck!

Comment   |  Flag   |  Jan 21, 2016

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Hi James, Under no circumstances 401k plans should limit participants for elective deferrals. Such plan should abide by ERISA (404c) and shall not assign limitations. If what you say is true then such plan should be looked for misguidance from TPA record keeper and plan formation clauses. Limitation in contribution are set by IRS and not the employer. For 2016 your allowed pre tax contribution are $18.000 respectively and $5000 for catch up contribution (age 50 or older). You can call my office and we can look at this together and determine what options you may have. 239-676-2320 Good Luck!

View all 4 Comments   |  Flag   |  Jan 27, 2016
Ryan Patrick Zacharczyk


Flag |  Jan 28, 2016
Tony Toska JSM, L.L.M

Ryan, You are right for top heavy plans to a certain extend. Just because TPA's setup a non-recourse legal remedy when a trustee executes the formal plan does not suffice or negate potential lawsuit for fiduciary responsibilities. This is a DOL superseding law and not an IRS ruling. I have seen many plans that fall under this category and end up in court with a potential suit. Also, advisers should be aware of the superseding law when there is split court decision in certain districts. You can contribute as much as you would like into the 401k equal to 100% of your earnings. However, up to $18.000 will be treated as elective deferrals and the rest will have tax consequences. Even though you may see a top heavy provisions within the plan doesn't mean that TPA's fully educate in legal and fiduciary duties that rely on the trustee of the plan. I suggest that if you have such plans consult with a ERISA attorney to fully understand legal consequences. I have seen a lot of cases when I did my Pro-Bono at the federal level small and big plans that were violating this provisions. I hope this helps!

Flag |  Feb 08, 2016

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