Sounds good. Yeah, the only trick would be not to front-load so much (or so little) as to lose the 4% -- shouldn't be too hard to avoid!

Actually, it *is* pretty hard to avoid leaving something on the table in Anna's situation. Say her base salary is $85k/year ($7083/month). If she contributes 20% of her monthly paycheck ($1417) every month to her 401(k), and gets no bonuses, then she'll contribute exactly the maximum of $17k ($1417*12 = $17k) by the end of the year. Meanwhile, her employer will multiply her monthly paycheck by 4% ($7083*.04 = $283) and add that extra $283 to her account each month, for a total match of $3400 ($85k * .04 = $283 * 12 = $3400) over the course of the year.

But say Anna gets a $7k bonus in October. Her total October paycheck will be $14k, and since her 401(k) automatically sucks in 20% of her paycheck, she'll contribute $2834 in October instead of $1417, which means that she'll hit the $17k max a month earlier and be unable to contribute anything for December. She'll also get twice the match ($566) in October, so even though she doesn't get any match in the last month, her total match for the year is still $3400.

The problem is that her total income, including the bonus, was now $92k instead of $85k, so the total match available to her was actually $3683 ($92k * .04). If she knew that at the beginning of the year, then she would have elected to contribute only 18.5% per month instead of 20% because then she would have been able to make 12 contributions instead of 11, and thus gotten 12 matches of $306 (=$3683) instead of 10 of $283 and 1 of $566 (=$3400). That leaves $283 on the table.

Alternatively, if she selects an 18.5% contribution expecting a $7k bonus, but the bonus never materializes, then she'll end up contributing only $15725 ($85k * .185), leaving her $1275 short of the $17k limit. That $1275 isn't "lost" like the $283 is, but it's taxed, and loses $319 to the taxman (federal only at 25%, not including state/local).

There are two solutions that 401(k) plans can provide to avoid this issue. The simpler one is what velocistar suggested, which is to allow you to specify a dollar amount of each paycheck to be contributed rather than a percentage. In that case, you just say "$17k max divided by 12 months = $1417/month". That guarantees you'll hit the $17k max, and also that a full 4% of your total yearly income will be contributed as a match, no matter what your yearly income ends up being.

The other option is to do a "true-up" (and that seems to be the accepted term-of-art. "catch-up" refers to something different, the contributions over $17k that over-50s are allowed to make). In that case, your company would say "oh, she made $92k and maxed out her contributions last year, but we only matched $3400, so here's an extra $283 to make up for it".

If your plan provides neither of these things, then there's a good chance you'll end up leaving money on the table somewhere. This particular example suggests it might be slightly better to under-contribute and maximize your match than to over-contribute and lose the match, but you'd have to work out the numbers precisely to know for sure.

Also, it might be worth asking your Finance Lady to look into modifying the 401(k) plan. After reading

the FAQ for eBay employees when their plan added true-up contributions, I got the feeling that these situations aren't part of some malicious scheme to screw employees out of matching funds (how many people actually hit the $17k limit early anyway?); rather, it's just a non-obvious mathematical quirk that no one really thought about when designing the plans. So I'd guess inertia would be the only thing you have to overcome to get it changed.