Author Topic: 401K match just got suspended...  (Read 1217 times)

Captain Cactus

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401K match just got suspended...
« on: April 08, 2020, 08:07:36 AM »
Good morning all:

We just got notification that our salary will be "temporarily" reduced by 10% and our 401K match will also be suspended until this COVID-19 situation resolves itself. 

What are your thoughts on continuing to contribute to the company 401K during this time without the match?  Do I continue to contribute, or reduce contributions down to 0% until the match is reinstated...the idea being that if match comes back in August (for example) I'd simply contribute a higher percentage through the rest of the year in order to maximize my match?

For context, I always max out my 401K and we happen to work with Vanguard so 70% goes to the S&P 500 fund and 30% goes into the total international fund. 

des999

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Re: 401K match just got suspended...
« Reply #1 on: April 08, 2020, 08:40:57 AM »
that's a bummer, but I would continue to contribute, assuming your company does catch up on contributions.  If they even contribute this year.

I wouldn't wait myself, as stocks are most likely lower now than they would be later in the year.  (ofcourse I don't know that for sure)

I actually upped my contributions last month to hit my max earlier in the year to get more stocks whilst prices are lower.

AdrianC

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Re: 401K match just got suspended...
« Reply #2 on: April 08, 2020, 08:42:53 AM »
If you continue to contribute can you still "contribute a higher percentage through the rest of the year in order to maximize my match", or is it one or the other?

Be nice to continue to buy while stocks are a bit cheaper.

MustacheAndaHalf

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Re: 401K match just got suspended...
« Reply #3 on: April 08, 2020, 08:45:05 AM »
Definitely makes sense - if you max your 401(k) too soon, you could lose out when they reinstate the matching program.

Also, I could be wrong about this, but I think the IRS checks for fairness in 401(k) plans.  It's probably very rare they take action, but I think if only people at the top contribute, and the rest of the company doesn't, the company's 401(k) plan might get some unwelcome scrutiny from the IRS.

I could be wrong about that: I'm not an attorney, just a layperson who read about it.

Fishindude

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Re: 401K match just got suspended...
« Reply #4 on: April 08, 2020, 08:56:32 AM »
I'd keep contributing.   You are still getting the tax savings which is significant, plus now there are some bargains out there on stocks you plan will be investing your money into.

Captain Cactus

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Re: 401K match just got suspended...
« Reply #5 on: April 08, 2020, 09:03:17 AM »
Thanks all, I think that advice to continue investing makes sense.  The long term gains of investing now likely outweigh the value of the company match with higher valuations (though I have no spreadsheet to confirm this gut instinct) :)

Thank you!

VaCPA

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Re: 401K match just got suspended...
« Reply #6 on: April 08, 2020, 09:08:18 AM »
Definitely makes sense - if you max your 401(k) too soon, you could lose out when they reinstate the matching program.

Also, I could be wrong about this, but I think the IRS checks for fairness in 401(k) plans.  It's probably very rare they take action, but I think if only people at the top contribute, and the rest of the company doesn't, the company's 401(k) plan might get some unwelcome scrutiny from the IRS.

I could be wrong about that: I'm not an attorney, just a layperson who read about it.
DOL monitors 401k plans compliance, not IRS. Taking action isn't done by government discretion. There are several tests a plan has to pass if they aren't safe harbored. One is the top heavy test that you referenced, which prevents only HCEs(highly compensated employees) from benefiting from the 401k plan. If you fail the test you don't really get in trouble. You just have to issue refunds to the HCEs out of their 401k, which counts as income in that year(since it went in untaxed). They usually don't like that.

EricEng

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Re: 401K match just got suspended...
« Reply #7 on: April 08, 2020, 09:46:01 AM »
Your gains on investing while the market is down could be more significant than the potential match.  Unless you are positive the match will come back and you can get all of it, I'd keep buying atm.

YttriumNitrate

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Re: 401K match just got suspended...
« Reply #8 on: April 08, 2020, 10:33:49 AM »
What are your thoughts on continuing to contribute to the company 401K during this time without the match?  Do I continue to contribute, or reduce contributions down to 0% until the match is reinstated...the idea being that if match comes back in August (for example) I'd simply contribute a higher percentage through the rest of the year in order to maximize my match?

While you said it's possible that the match could come back later this year, is it also a possibility that later this year you'll lose your job and be unable to contribute to a 401k?

magnet18

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Re: 401K match just got suspended...
« Reply #9 on: April 08, 2020, 01:45:20 PM »
DW is in a similar boat, 20% cut and no more match

We upped her contribution amount to compensate for the 20% match so she's still on track to max for the year

Bites, but better than unemployment

Captain Cactus

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Re: 401K match just got suspended...
« Reply #10 on: April 08, 2020, 06:16:03 PM »
DW is in a similar boat, 20% cut and no more match

We upped her contribution amount to compensate for the 20% match so she's still on track to max for the year

Bites, but better than unemployment

Hang in there... there will be another side of this madness.

magnet18

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Re: 401K match just got suspended...
« Reply #11 on: April 09, 2020, 10:23:06 AM »
DW is in a similar boat, 20% cut and no more match

We upped her contribution amount to compensate for the 20% match so she's still on track to max for the year

Bites, but better than unemployment

Hang in there... there will be another side of this madness.

Oh I'm certain.  And I've been glad for the opportunity to buy the dip.  My 2020 roth contributions are up 20%! (We'll see if it stays up for long)