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How to prevent 401k overcontribution

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  • How to prevent 401k overcontribution

    This may seem like a silly Q. New w2 job with 401k asking for % contribution. Is there a way to dollar cap how much goes in so I don't overcontribute - my pay varies monthly and I can't give an accurate % to hit the max without going over/under.

  • #2
    Who handles the payroll at your new job? Software should cut you off when you reach the yearly max contribution (just like it should once you reach the SS withholding limit). If there is a match, be sure to check if there is a true up at the end of the year if necessary. O/W you may not get the full match depending on how they credit the $ with each payroll.


    • #3
      If you only have one job they should stop at the max. I just back into it and double check at the end of the year.


      • #4
        An employer is required to limit only employee deferrals solely to their plan. The employer is responsible for detecting and correcting any such excess contributions.

        An employer may but is not required to limit employee deferrals based on deferrals to other plans. However, the employee/participant is responsible for limiting employee deferrals to multiple employer plans. Also, they are responsible for detecting, calculating and requesting removal of any excess contributions.

        This generally requires the latter's payroll to accept entry of deferral amounts to other employers. It is not common for an employer's payroll software or plan software to be able to do this. In a small company this maybe could be handled manually.

        The question of if/how employee deferrals can be limited needs to be directed to the employer.