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Hi, Fools!

My employer offers a 401k and a three fifths match. I only found out recently that I was entitled to contribute so I only started now. My employer - who claims I should have known - tells me I cannot 'catch' up by contributing more now and receive a match for those first nine months of the year that I missed until now.
Is my employer right? Can anyone tell me under which conditions it would be possible to 'catch up' and benefit from the 401k option and match?

Any arguments that I can use to convince my employer are welcome.

Many thanks to all you fools!

Tim

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You really have two issues here. the first is, how much can you contribute for the balance of the year. Employee salary deferal contributions may only be made out of future earnings. You may; however, contribute up to the max THAT YOUR PLAN PERMITS for the remainder of the year (which could be up to 100% of your pay - but more commonly, plans limit deferals to something less - we typically see 50% of salary as the cap for deferrals).

The second issue is how much of that will be matched. You say that your employer provides a 3/5ths match - which I assume means that your employer contributes a match of $0.60 for each dollar you contribute. What you don't specify is what the limit of the match is (i.e. will they only match the first 6% you defer) and whether the match is calculated on a payroll basis or an annual basis. If the match is calculated on a payroll basis, then you will only receive the match for future deferals up to the limit of the match as specified in the plan. If it is calculated on an annual basis (EVEN THOUGH your employer makes matching contributions on a payroll basis (NOTE - there is a difference between how a match is calculated and when it is contributed)), then you may be entitled to a match based on the plan limit over your total yearly comp (with the balance of any match being contributed after the end of the year, and typically referred to as a "true-up match"). Get a copy of the Summary Plan Description and read it. Ask questions, and specifically ask if true-up contributions have been made in the past.

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Any arguments that I can use to convince my employer are welcome.


Unfortunately, "convincing" isn't really an option.

401k plans are governed by complicated legal documents that can not be changed on a whim (even with good reason). If the plan allows you to do what you are asking, then go for it. If not, no amount of pleading or wheedling is likely to help. You can ask your HR department for details, and you can ask for a copy of the 401k summary plan document, but if the plan as written doesn't allow it, it doesn't allow it.

You may have to chalk it up to experience. If its any consolation, you will make future investment decisions which will lose you far more money than you lost on this one. :-)

My employer - who claims I should have known - tells me I cannot 'catch' up

Hrm. Your employer has a point. If you wanted to participate in the 401k, you needed to ask when you become eligible to participate.

Good luck,
JDOyster
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Tim,

Many employers match on a paycheck basis and there is no way to 'catch up' on employer matching. It means that you must contribute every paycheck of the year. Every year you will need to make certain that you do not max out your contributions before the end of the year.

Employer matching is completely at the descretion of the employer.

Where you given plan documents during orientation? If you were not provided with the information, it might be possible to argue that you should not be punished for HR's mistake. One year my company did match based on entire years contributions (not paycheck) because a number of employees had complained.

Debra
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