Author Topic: 401(k) Matching Question  (Read 1297 times)

Eric9064

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401(k) Matching Question
« on: December 07, 2016, 11:00:59 AM »
My wife just became eligible for her 401(k) and we had intended to front load her contributions, but I am not sure this is possible if I understand her plan correctly. Relative provision is:

"The Company will make a matching contributions equal to 100% of your elective deferrals. The company will not match elective deferrals that exceed 2% of your eligible earnings... you must make elective deferrals to receive the match. Once the your elective deferral stops, the matching contributing stops"

If I understand this correctly, to maximize the match, she would have to structure her contributions so that the maxing out her 401(k) occurs simultaneously with her last pay check. This would result in her whole salary constituting "eligible earnings" and in obtaining the largest employer max.

Is the foregoing correct? We will of course confirm with her employer, but wanted to get my head around the issue first. Any help is appreciated. 


seattlecyclone

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Re: 401(k) Matching Question
« Reply #1 on: December 07, 2016, 11:03:01 AM »
Many plans will only match for the paychecks where you contribute, and it sounds like yours may be one of them. Other plans will make sure that you get the full match if you contribute unevenly throughout the year. Ask the people at your company to be sure.

CmFtns

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Re: 401(k) Matching Question
« Reply #2 on: December 07, 2016, 11:26:36 AM »
In my experience it is most common that companies match on a paycheck by paycheck basis... both my GF and I must meet the 401k max on the last paycheck or we won't get a match if we do it early... For me that is easy as a salaried employee but my GF is hourly and has random overtime and has to change her contribution every paycheck to make sure hitting 18k lines up with the last paycheck of the year.

Eric9064

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Re: 401(k) Matching Question
« Reply #3 on: December 07, 2016, 12:23:15 PM »
Thanks for the replies. Appreciate the feedback.

BlueHouse

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Re: 401(k) Matching Question
« Reply #4 on: December 07, 2016, 01:30:17 PM »
Yes you are correct.  Sometimes companies don't realize that they can change their contribution policies.  They clearly aren't trying to hide it, and they want their employees to get every cent they're entitled to, which is why they described it so accurately.  So why don't you ask them if they'll consider changing the plan documents?  It's as easy as picking up the phone if the HR / benefits administrator at your wife's company isn't a chicken.  The Benefits Admin should propose this to the company executive (COO or similar) and explain that it's in the best interest of your employees to offer a true-up at the end of each year for those employees who are responsible savers and who front-load their 401ks.  The only possible reason for not wanting to do this is for the company to want to tightly manage cash-flow and avoid surprises where everyone fully loads their 401k in a single month. 

Eric9064

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Re: 401(k) Matching Question
« Reply #5 on: December 07, 2016, 02:46:05 PM »
Bluehouse, if it were my company, I would take the steps you proposed. My wife on the other hand will not want to, so it is not a possibility. I don't really mind having to spread the contributions across the year, just takes a little more effort.