I was told my plan may be a little overfunded in year one. What does that mean?

These plans are largely determined by age and W2 income, so the older and the higher the W2 the more you can contribute. In the first year you have a little bit more flexibility and can front load the plan. But this can have the following impact:

1. If you want to fund at a similar level in the next few years then you may want to consider increasing your W2 this year. If you don’t you may find that next year’s contributions will be a little lower.
2. If you had a good year this year and are looking for a nice tax deduction and you think next year’s income will be lower, then you may be fine leaving this year as is.
3. If you want higher contributions for next year, then you will most likely have to get next year’s W2 up.
4. If you just want to get this year done and not worry about next year that’s fine.

The moral of the story is that if you are looking for similar contributions in future years, you may want to consider getting your W2 compensation higher for the current year. But if you are OK with the items noted above then that’s fine. Make sure you also discuss the issue with your CPA.