Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Author: zonker Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: 401K Contributions Date: 12/6/1997 10:08 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Question to anyone who has knowledge about IRS guidelines regarding contributions to a company sponsored 401K plan.

What is the amount of money that a person can contribute to a 401K plan during a calendar year?

Does company matching contributions count toward that limit? (ie. if a company matches up to 3% of your contributions does that reduce the amount you can contribute?)

If a person contributes a larger % of their paycheck up front during the year toward the plan, will that lower the company matching contribution. The reason I ask is that a company matches a percent up to your eligible annual income and if you max out your contributions early, say September, the matching would not reflect what you have earned during the entire year (only through September).

This issue has come up as I have changed jobs this year due to an acquisition. My old company let me contribute (1996) a total of $9500 of my own money toward the 401K plan and then matched those dollars. My new company is telling me that I can only contribute (1997) a total of $9500 including match. Is this something that is company specific (companies don't have to match) or regulated by the IRS?

Any insights would be appreciated.
Print the post Back To Top
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 842 of 121061
Subject: Re: 401K Contributions Date: 12/7/1997 11:42 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
<< What is the amount of money that a person can contribute to a 401K plan during a calendar year?>>

Generally, $9,500 (which will be increased for inflation) is the maximum contribution.

<< Does company matching contributions count toward that limit? (ie. if a company matches up to 3%
of your contributions does that reduce the amount you can contribute?)>>

Generally not. The employer's deduction is generally limited to the LESSER of 15% of wages or $22,500 (could be higher if integrated with other plans).

<<If a person contributes a larger % of their paycheck up front during the year toward the plan, will
that lower the company matching contribution. The reason I ask is that a company matches a
percent up to your eligible annual income and if you max out your contributions early, say
September, the matching would not reflect what you have earned during the entire year (only
through September).>>

That will depend upon how the plan is structured, and you should check with your 401k administrator to really get the appropriate answer. But if you max out, you max out...regardless of when that takes place. So I'm not really sure that I understand your question.

<< This issue has come up as I have changed jobs this year due to an acquisition. My old company let
me contribute (1996) a total of $9500 of my own money toward the 401K plan and then matched
those dollars. My new company is telling me that I can only contribute (1997) a total of $9500
including match. Is this something that is company specific (companies don't have to match) or
regulated by the IRS?>>

Sounds like a company specific issue to me. Remember that employer match is NOT mandatory. They must just be running their plan a little differently. Which is their right. But if that is how it REALLY works, it's not such a wonderful deal, is it??

TMF Taxes
Roy



Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: KATinChicagoland Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 844 of 121061
Subject: Re: 401K Contributions Date: 12/8/1997 12:59 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
<<My old company let me contribute (1996) a total of $9500 of my own money toward the 401K plan and then matched those dollars. My new company is telling me that I can only contribute (1997) a total of $9500 including match.>>

Generally agreeing with Roy's response, I want to comment on this portion of the original message. Companies have a fair amount of flexibility as to how they structure matching contributions (and are not required to make them at all), but the description of what your new company is doing is very odd. I have seen many 401k plans and never heard of one structured in this way. There's a possibility your question was not properly understood, or the answer was simply mistaken. If I were you, I would check the Summary Plan Description for the plan. This is a document you should have received when you became eligible to participate in the plan. Its purpose is to explain the plan in language that can be understood by participants. If you did not receive it, request a copy from your employer. To be truly certain of your situation, you would need to read the Plan Document, but this is filled with legalese and may be more confusing than enlightening. You have a legal right to receive a copy of both the SPD and the Plan Document. It's possible the plan truly does limit deferrals plus matching contributions to $9,500, but I'd be surprised if that were the case.

KAT in Chicagoland

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Advertisement