An IRS rule limits how much highly compensated employees contribute to qualified retirement plans relative to non-highly compensated employees.
Q: I'm with a small group practice and in 2008 contributed $15,500 (the IRS maximum for that year) to my 401(k) with no company match. I received a check for excessive contribution and was told that it was due to the "average deferral percentage" test. Why is that, and how do I solve this problem?
A: The average deferral percentage test is an IRS rule that limits how much highly compensated employees contribute to qualified retirement plans relative to non-highly compensated employees.
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