Author Topic: Botched 401k Match - Can I get it back?  (Read 573 times)

Gatzbie

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Botched 401k Match - Can I get it back?
« on: June 30, 2019, 09:09:13 AM »
This was my first year contributing to a 401k & due to a misunderstanding, will most likely cost me my match - for the rest of the year —Bummer!

I thought my match was just 6% of whatever I contributed, but its actually 6% of my salary on a paycheck-to-paycheck basis. As getting to contribute to a 401k for the first time, I was gung-ho & maxed it out as fast as I could thinking this would just maximize my match too.

In reality, I should have had a lower elective contribution rate & spread it out throughout the entire year so I could maximize this match while maxing out to the $19k limit for 2019. Because I have reached the $19k limit now, I will not be able to contribute to my 401k on future paychecks this year thus not getting the match for the remaining months of 2019.

I will be talking will HR benefits people tomorrow to see if I can do anything to correct this.  I’ll check to see if there is a “true up” feature. Other than this, are there any other options to correct this mistake?

Thanks!

P.S. - Pretty sour on how such a silly mistake can cost quite a bit of money, going forward - lesson DEFINITELY learned.

terran

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Re: Botched 401k Match - Can I get it back?
« Reply #1 on: June 30, 2019, 09:19:02 AM »
This is a pretty common plan design, and a pretty common mistake. Don't feel bad. Lesson learned. The max $1080 you lost won't make that much difference in the long run.

There may be a true up at the end of the year. If not, I doubt there's much you can do to fix it. You could ask if there after tax contributions are allowed (not Roth, after tax) as that would let you continue contributing past the $19k limit. If so, find out what your options are with that money. Some plans will let you withdraw after tax money while still working even though you can't withdraw anything. Even better, some plans let you roll over the after tax money to Roth or to a Roth IRA. If either of those is an option research the "mega backdoor Roth."

Gatzbie

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Re: Botched 401k Match - Can I get it back?
« Reply #2 on: June 30, 2019, 09:24:43 AM »
Yes, I am just glad I accidentally discovered this now rather than years later.

I will be able to keep contributing past the limit via mega backdoor Roth. These after-tax contributions do not get matched but its a really good feature I want to try utilizing this year too.

Geographer

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Re: Botched 401k Match - Can I get it back?
« Reply #3 on: July 01, 2019, 05:48:26 AM »
The max $1080 you lost won't make that much difference in the long run.

Max $1080? OP never mentioned their salary, which the 6% employer match is based on.

OP, don't feel bad. Many 401k plans have loopholes and "gotchas" like that. A couple years ago I left an employer in early December, and that employer only matches their 6% 401k contribution for the year as a lump sum if you're still employed on 31 December of that calendar year. So by leaving at the beginning of December instead of staying through the year, I missed out on the whole match for that year. I hate leaving money on the table, but it happens!

terran

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Re: Botched 401k Match - Can I get it back?
« Reply #4 on: July 01, 2019, 06:22:26 AM »
The max $1080 you lost won't make that much difference in the long run.

Max $1080? OP never mentioned their salary, which the 6% employer match is based on.

You're right, for some reason I was thinking 6% of the contribution and not the salary even though that's not how it usually works. I also did the math on an $18k contribution, so just confused all the way around.

Enough

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Re: Botched 401k Match - Can I get it back?
« Reply #5 on: July 01, 2019, 11:20:25 AM »
You can probably still get the match.  I would check, but usually you may be allowed to continue contributions to your 401k, over the maximum contribution limit -  its just that those contributions over the limit are not tax deductible. 

I learned this in a year that I over contributed by ~$87, my 401k provider just classified those dollars separately and i was able to write myself a check for those dollars.

Per this article, you may then be able to withdraw the over-contributions up to april 15th of next year. https://www.doughroller.net/retirement-planning/happens-contribute-401k/

In your situation, I would  contribute the minimum to get the match for the rest of the year, and then try to correct it with a distribution between 1/1 and 4/15 next year.

ginjaninja

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Re: Botched 401k Match - Can I get it back?
« Reply #6 on: July 01, 2019, 11:25:44 AM »
I spoke with my company HR and for me the 6% salary counts through the end of the year.  So as long as by the end of the year I have 6% of my salary in my 401k they will match so there is no penalty for maxing early.

Good luck with HR, I hope your company is similar to mine.