The IRS recently released the 2019 retirement plan contribution limits.

For super-savers at Chevron, things are looking up. Here are a few of the most noteworthy changes:

Chevron employees can now contribute up to $19,000 (or $25,000 for those over 50 years old) of pre-tax or Roth savings to the Employee Savings Investment Plan (ESIP).

Chevron’s limit on after-tax contributions has remained at $14,600, which means employees can contribute up to $28,000 (or $34,000 for those over 50 years old) between pre-tax and non-Roth after-tax savings to their 401(k).

How Chevron Employees Can Make Tax-Efficient Retirement Plan Contributions

If you are contributing after-tax dollars to the Chevron ESIP, consider rolling out the after-tax funds to a Roth IRA at the tail end of the third quarter to take advantage of the mega backdoor Roth strategy. For many Chevron employees that are contributing after-tax, the end of the third quarter is the best time to do the rollout because the Chevron ESIP freezes all contributions to the plan for 90 days afterward.

 

Chevron 401k contribution amount graph

2019 Annual Compensation Limits and Strategic Saving for Chevron Employees

The annual compensation limit for 2019 has increased from $275,000 to $280,000. If you make more than $280,000 in base and bonus compensation for 2019, remember to ensure that you max out your ESIP contributions before earning $280,000 of income. After you earn $280,000 of income, you can no longer contribute to the Employee Savings Investment Plan.

Chevron contributes up to an 8% match to employee 401(k) accounts. Since the annual compensation limit for 2019 is now $280,000, Chevron will now cap out contributions to the ESIP at $22,400. In 2019, once you begin making more than $280,000, Chevron will be making their contributions to the Employee Savings Restoration Plan (ESIP RR) instead of the Employee Savings Investment Plan. If 2019 is the first year you expect to make over $280,000, check that you have an allocation and investment strategy set up for your ESIP RR.

In addition, many Chevron employees will be able to take advantage of higher contribution limits for backdoor Roths. Since the IRA contribution limit for 2019 is now $6,000 (and $7,000 for those over 50 years old), super-savers at Chevron can put away $34,000 (or $41,000 for those over 50 years old) between the 401(k) and backdoor Roths into tax-preferred retirement accounts.

The 2019 limit adjustments will be advantageous for super-savers at Chevron and it is important to be sure that you make the most of these changes. Willis Johnson & Associates will be working with our clients over the next few months to assist with adjusting contributions based on the new IRS rules.

In 2019, we will follow up with clients who are eligible to take advantage of backdoor Roth IRAs to ensure they are on track for success. At the tail end of the third quarter–once our Chevron clients who contribute after-tax savings to the Employee Savings Investment Plan have reached their max contributions– we will help facilitate after-tax rollouts from their Chevron ESIP accounts.

If you have any questions about the 2019 contribution and compensation limits, please contact your advisor, or schedule a free consultation with one of our Chevron specialists.