Author Topic: Bonus + 401k  (Read 1151 times)

kenmoremmm

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Bonus + 401k
« on: July 24, 2019, 10:30:54 AM »
I'm curious if anyone here receives annual bonuses from their employer and has been able to convince said employer to contribute the bonus to their 401k as a discretionary contribution (provided total contribution < $56k for 2019). Any hurdles encountered? Any advice?

EvenSteven

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Re: Bonus + 401k
« Reply #1 on: July 24, 2019, 10:35:35 AM »
As Walter Sobchak once said:

"Keeping this type of animal within city limits, that ain't legal either, dude."

I don't think it is legal for your employer to do this.

kenmoremmm

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Re: Bonus + 401k
« Reply #2 on: July 24, 2019, 11:02:27 AM »
well, i know my employer does do extra contributions to the 401k for all in the office. we have a "safe-harbor company match" and a "year-end Employer Match".

one of them is the company matching where i get 4% matching from my company if i put in a minimum of 5% of salary.

the other is like a company pool of money. say the company has $100k profit that is allocated to the 401k plan (i'm not sure of the mechanics of it). if there are 10 employees, all maxing out out their plan, then each gets $10k added. if employee contributions vary (some max it out, some don't), then the $100k is prorated according to the weighted contributions of each employee.

PDXTabs

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Re: Bonus + 401k
« Reply #3 on: July 24, 2019, 09:22:40 PM »
No, but I've worked somewhere that let the employee contribute part of their bonus as if it were salary and they matched on that contribution too!

sonoranson

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Re: Bonus + 401k
« Reply #4 on: July 25, 2019, 06:46:31 AM »
You could change your 401k contributions to a dollar amount to match the take home of the bonus check (or whatever amount you wanted from it).  Once that hits on the next payroll, change it back to whatever amount it's set to now.  I know my 401k company allows you to set a percentage or a specific dollar amount to be taken out each check.

BabyShark

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Re: Bonus + 401k
« Reply #5 on: July 25, 2019, 07:11:45 AM »
No, but I've worked somewhere that let the employee contribute part of their bonus as if it were salary and they matched on that contribution too!

Yup, that's how my work does it.

reeshau

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Re: Bonus + 401k
« Reply #6 on: July 25, 2019, 07:41:04 AM »
My company (the US branch) follows your 401k deposit advice for the paycheck with our bonus, like any other paycheck, including the company match.  They communicate ahead of time each year that the bonus is coming, and deadlines to adjust instructions for that paycheck.  While I don't think they would let you change to 100% deposit, you could do a very high level, and effectively do this.

Just remember to change your instructions back before the next check.  Quite a few people forget!

Slow&Steady

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Re: Bonus + 401k
« Reply #7 on: July 25, 2019, 07:52:44 AM »
You could change your 401k contributions to a dollar amount to match the take home of the bonus check (or whatever amount you wanted from it).  Once that hits on the next payroll, change it back to whatever amount it's set to now.  I know my 401k company allows you to set a percentage or a specific dollar amount to be taken out each check.

My company pays out the bonus separately and they cannot put it into 401k.  The above advice was what I was told my the HR benefits person with my company.  Basically, look at the bonus as a regular (or part of or a couple) paycheck and then change your contributions for your next regularly scheduled check to account for the amount of the bonus that you wanted to put into the 401k. 

EvenSteven

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Re: Bonus + 401k
« Reply #8 on: July 25, 2019, 08:00:52 AM »
The advice given by several posters is to make an employee contribution, which is of course different from an employer contribution.

Employees can make contributions how they like up to 19K, but employer contributions must follow the same rules and contribution percentages for all employees.

ChpBstrd

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Re: Bonus + 401k
« Reply #9 on: July 25, 2019, 08:30:26 AM »
May I rephrase the question?

Can an employer pay a bonus as a discretionary employer contribution to the 401k, so that this employer contribution does not count toward the $19k limit on employee contributions?

I would like to know the answer. My employer gives us a form each year asking if we want our established 401k deduction percentage withheld from bonus checks, but they are treating this as an employee contribution.

ysette9

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Re: Bonus + 401k
« Reply #10 on: July 25, 2019, 11:22:04 AM »
It is a standard feature at my employer to be able to opt in to having your bonus go directly into 401k. I adore it.

ysette9

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Re: Bonus + 401k
« Reply #11 on: July 25, 2019, 11:24:24 AM »
May I rephrase the question?

Can an employer pay a bonus as a discretionary employer contribution to the 401k, so that this employer contribution does not count toward the $19k limit on employee contributions?

I would like to know the answer. My employer gives us a form each year asking if we want our established 401k deduction percentage withheld from bonus checks, but they are treating this as an employee contribution.
Sorry, didnít see this clarification before responding. I donít know if that is possible. We can opt into having our bonus go into 401k but that counts towards the employee contribution, so effectively front-loading the 401k.

Car Jack

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Re: Bonus + 401k
« Reply #12 on: July 25, 2019, 11:50:16 AM »
We had an executive snafu where the top dogs in the company screwed up big time.  Their solution was to ignore all the metrics that would have given every employee in the company a certain bonus and zero'd them.  Instead, they gave out some RSUs that would vest in 6 months and 1 year and added to the 401k.  It was their way of kicking that can down the road so investors saw immediate drops in outgoing money.  Since investors can't see beyond next Tuesday, they see nothing that far out.