401k contributions

[JenR]

We're planning on filing ch13 in the near future (October at the earliest). Because of wage reductions, my husband reduced his 401k contribution (from $250/month to $50/month) recently. Should (or can) he return to his pre-wage-reduction contribution prior to filing? Is that contribution considered in the means test? I've read so much information about it all, I think I'm beginning to lose my mind

Thanks!

[lrprn]

What % of your husband's income is he contributing now to his 401K every month? And what % of his income was he contributing before?

[JenR]

He's contributed 4% for the past several years. In February he took a 10% pay cut, so he reduced his 401k contribution (to about 2.5%), to help make up some of the loss of income. He lost another 5% pay just this month, so he reduced his contribution to ZERO (but it will not take effect until his September 1 paycheck - he only gets paid once a month).

Because he works for the state, there is NO employer matching of his 401k plan. Just in case that information has any impact.

[lrprn]

He's contributed 4% for the past several years. In February he took a 10% pay cut, so he reduced his 401k contribution (to about 2.5%), to help make up some of the loss of income. He lost another 5% pay just this month, so he reduced his contribution to ZERO (but it will not take effect until his September 1 paycheck - he only gets paid once a month).

He's been contributing a % that's allowed by most Ch 13 trustees. (Many courts cap contributions at 5% of total income for each filer, but even at his highest level he was below that.)

Because your husband has a history of making 401K contributions, as long as you are filing in a local court that allows 401K contributions during an active 13 (and luckily this is most of them), he should be fine restarting his contributions before you file.

As always, check with your lawyer to find out exactly what's ok to do in your local court and what your trustee will tolerate before doing anything.

[treehugger1]

Whoa! You said he works for the state. I assume he is in CALPERS? If so, I would also assume he does not have a 401 but an optional 403(b) plan that he pays into. A 401 might be fine, but if it's a 403(b) this may be reduced or eliminated, in terms of future contributions. Your attorney should have some sense of this.

[ConfusedinOC]

I work for CA (Caltrans) and participate in both the Calpers pension plan which I pay 5%and the DPA 401K Saving Plus Program which I pay 1% (lowered from 4% due to 3 day monthly furloughs). Both the pension and 401K are optional and deducted from check. Can I include them in a CH 13 repayment plan to lower DMI?

[JenR]

From what several lawyers have told me the 401k contribution is an acceptable deduction (as long as it's a reasonable percentage being deducted). As far as the other pension you are speaking of, I don't know. My husband and I are both state employees. We both contribute to 401k and we both pay into our retirement (which is, as you know, not voluntary). In our case, those are both acceptable deductions. Hope that helps.

[ConfusedinOC]

Thanks for the reply.

[maddog2112]

When I started my 13, 30 mos. ago I was contributing 7% of my income toward my 401k, and it was used as a qualifing deduction. I was paying a 75% payback so that may have helped my case also.

[13inIN]

In our case, I had dropped the 401k % just before deciding to file... forgot to change it back, and then filed with the lower percentage. (6 to 3%)

The trustee objecting to me changing back to 6 even though I had historically been there all along, but accepted 3% - as filed.