Last week, I wrote a post on the investment changes in Intel’s SERPLUS account, but I did not address one additional change that should be considered when electing how much to defer to SERPLUS so let’s address that change here:
The change is that in 2020, Intel will match SERPLUS deferrals up to 5% of “excess pay.”
The match replaces the discretionary retirement contribution that Intel considered annually in past years if your compensation exceeded the annual IRS compensation limit ($280,000 in 2019). For example, assume you earned $300,000 in 2019. The Intel 401k plan included an employer matching contribution of up to 5% of your compensation. However, because of the IRS compensation limit rules, Intel could only make matching contribution of up to $14,000 (5% x the compensation cap of $280,000) – not $15,000 (5% x your full compensation of $300,000). Thus, in years past Intel could contribute that additional $1,000 to your SERPLUS account. The change is that in 2020 there will be no discretionary contribution. Instead, it will be in the form of a match.
In other words, if your compensation exceeds the limit, you have to defer to SERPLUS to get the match. So…
What’s the minimum you should defer to get the SERPLUS match?
In order to determine how much you should defer to optimize the match, you need to be able to estimate your excess pay for 2020. Excess pay is calculated by taking your total eligible compensation subtracting any salary/bonus SERPLUS deferral and subtracting the IRS compensation limit. Thus, if the annual compensation limit remains at $280,000, you will want to calculate the amount you expect to exceed $280,000 and plan to defer at least 5% of that amount.
For example, let’s say you expect your salary to be $275,000 and bonus to total $100,000 in 2020. You’re excess pay would be $95,000 ($275,000 + 100,000 – $280,000). You would want to defer at least $4,750 (5% x $95,000 or ~1.72% of your salary) to take advantage of Intel’s match in the account. Now keep in mind that what you defer will reduce the total eligible compensation so the actual match will be a bit less than this. In this example if you deferred $4,750, your excess pay would be reduced from $95,000 to $90,250. Thus, the match would top out at $4,512.50 (5% x $90,250).
Ultimately, whether to defer and how much to defer to SERPLUS are decisions that should take into account several factors about which we we’ve previously written. This new matching method for 2020 just layers in one further consideration (especially if you were planning not to defer anything). If you would like help thinking about how to much to defer given your situation, I encourage you to ask us for help!
The information contained in this post is based on Cordant’s understanding of the Intel SERPLUS plan as of the date of the post. The Plan is subject to change by Intel. Please see your latest Plan document for the most up to date information.