No. of Recommendations: 2
It depends on the rules of the plan. Most 401(k) plans I've worked with the max annual salary deferral is divided by 12 to determine max monthly contribution.

I'm not sure your sample is representative. In the 10 401(k) plans that I had throughout my career, none of them ever had a monthly limit calculated like that. All limits were all based on % of income that the employee could contribute, up to the deferral limit. The used to be a Federal law limiting the % of income that could be contributed to 25%, which is why many plans based their limits on a % of income. When the EGTRRA* (Economic Growth and Tax Relief Reconciliation Act) was passed in 2001, the legal limit on % of income was lifted, and just required that SS and Medicare taxes be withheld - which effectively limits anyone who makes less than the SS tax cap to 92.35% Many plans were slow to enact the new limits, and many still set limits lower than the max allowed.

*This was also the legislation that authorized Roth 401(k) accounts, although plans could not start offering Roth 401(k) accounts until 2006.

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.