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  • 401k matching

    Total newbie here trying to play catch up as fast as possible. 401k question:
    If my employer matches half of 6%, but 6% of income is more than the 18,000 limit, do I just contribute the limit and lose out on some of the match?
    Thanks in advance for answering my dumb question.

  • #2
    Someone more knowledgeable than me can give you a definitive answer, but this deals with (annoying) IRS HCE rules.  I think your employer can give you 3% of your income up to the IRS HCE limit, which is 270k this year.

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    • #3
      Well yes you should contribute to the limit regardless.  Ask your HR department if it isn't clear in your contract how the match is calculated.  There are a variety of methods

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      • #4


        If my employer matches half of 6%, but 6% of income is more than the 18,000 limit, do I just contribute the limit and lose out on some of the match?
        Click to expand...


        Generally, you are still able to make the full $18,000 contribution (unless you're >50yo, then it's $24,000) and any employer match/contribution is capped by the total contribution limit of $54,000. So they have $54,000 - $18,000 = $36,000 up to which they can match/contribute on your behalf.


        I think your employer can give you 3% of your income up to the IRS HCE limit, which is 270k this year.
        Click to expand...


        This sounds correct and is another limitation on how much the employer can match/contribute, in addition to the previous one just mentioned. FYI: HCE = highly compensated employee.

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        • #5
          So they'll contribute 3% even though it rises above the 1/2 match of my 401k contribution? That seems awfully generous of them.

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          • #6
            ...so they match half your elective deferrals up to 6%? Does that mean they'll max the calculation of half using 6% (meaning 3%), or that the most that'll give is the lesser of half your contribution or 6% of your salary? Sounds like you max it at $18,000 and they throw in another $9,000.

            Now, how and when do they match? My wife's employer puts in a lump sum each February based on the prior year's deferrals. Some employers match each time a contribution is made. If it's the former, you can max it out asap in the year and let it grow, but if it's the latter, then you should stretch it out over the whole year to maximize matching.

            Get your HR rep to spell out the specifics for you.

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            • #7




              …so they match half your elective deferrals up to 6%? Does that mean they’ll max the calculation of half using 6% (meaning 3%), or that the most that’ll give is the lesser of half your contribution or 6% of your salary? Sounds like you max it at $18,000 and they throw in another $9,000.

              Now, how and when do they match? My wife’s employer puts in a lump sum each February based on the prior year’s deferrals. Some employers match each time a contribution is made. If it’s the former, you can max it out asap in the year and let it grow, but if it’s the latter, then you should stretch it out over the whole year to maximize matching.

              Get your HR rep to spell out the specifics for you.
              Click to expand...


              Yep -- you need to talk to HR to understand the mechanics.

              With my 401(k), the company stretches the match over about 20 pay periods and only contributes when you contribute. If you front load and stop contributing at $18,000, the match will stop coming. They do make it up with a "true-up" the following calendar year. I asked ahead, got bad information, and found this all out the hard way.

               

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              • #8
                I suspect that the OP can only receive a max of $8100 in match money (3% of $270k) on top of the $18,000 he puts in but agree he needs to talk to HR about this, as it can be very tricky.  This is how it works at my hospital.  I put in 5% every pay period and receive my match of 4% at the end of every pay period, and once I reach the HCE cap, I no longer receive the match for the rest of the year.

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