Comments on: Does the 401(k) max contribution limit include the employer match? http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/ Because wealth is better than poverty, if only for financial reasons. Mon, 06 Feb 2012 01:49:45 +0000 hourly 1 http://wordpress.org/?v= By: Lori Neal http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-2/#comment-185019 Lori Neal Wed, 25 Jan 2012 14:45:19 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-185019 Why is everything so confusing? I do payroll for a company of about 310 people and we have quite a few heavy earners ans we are constantly having to undergo 401K census's and make adjustments on what these earners are able to contribute. The owner and general manager both maxed out there personal contributions and we only match 25 percent of the first 4 percent of the employee contributions and I was told to shut off the contribution because they had reached there max and now no one seems to know what that amount should be. If someone contributed 16500.00 wouldn't that limit be only $660.00? I know we contributed more than that on their behalf. Why is everything so confusing? I do payroll for a company of about 310 people and we have quite a few heavy earners ans we are constantly having to undergo 401K census’s and make adjustments on what these earners are able to contribute. The owner and general manager both maxed out there personal contributions and we only match 25 percent of the first 4 percent of the employee contributions and I was told to shut off the contribution because they had reached there max and now no one seems to know what that amount should be. If someone contributed 16500.00 wouldn’t that limit be only $660.00? I know we contributed more than that on their behalf.

]]> By: David http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-2/#comment-173100 David Thu, 29 Dec 2011 15:16:10 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-173100 Great site, Here is what I am looking at. An employee has exceeded the $245K earnings for the current year, yet he has not fully contributed his $16,500 can he continue to contribute to his fund? Great site, Here is what I am looking at. An employee has exceeded the $245K earnings for the current year, yet he has not fully contributed his $16,500 can he continue to contribute to his fund?

]]> By: James http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-172755 James Wed, 28 Dec 2011 15:57:11 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-172755 Great discussions. I may have missed this in the other comments, but my question is one of catch-up. I contributed approximately $14K this year and would like to know what options I have to bridge the gap to max out at $16.5K? Can I take out a Roth or are there any options with my employer? I am assuming I will miss out on my employers match at this point? Great discussions. I may have missed this in the other comments, but my question is one of catch-up. I contributed approximately $14K this year and would like to know what options I have to bridge the gap to max out at $16.5K? Can I take out a Roth or are there any options with my employer? I am assuming I will miss out on my employers match at this point?

]]> By: Richard http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-172446 Richard Tue, 27 Dec 2011 20:35:41 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-172446 First, excellent information. I do have a couple of questions. I have a wholly owned C corporation, so I'm the employee and the employer. I'm over 50. I calculate as the employee I can contribute $22,000. As the employer I can match the $22,000. A total of $44,000. Well within the limit. So here's the questions: Is the employer contribution tax deductible from the corporation's earnings? What type of red flags would this raise with the IRS if the 22,000 represented 90-100% of my salary? First, excellent information. I do have a couple of questions. I have a wholly owned C corporation, so I’m the employee and the employer. I’m over 50. I calculate as the employee I can contribute $22,000. As the employer I can match the $22,000. A total of $44,000. Well within the limit. So here’s the questions: Is the employer contribution tax deductible from the corporation’s earnings? What type of red flags would this raise with the IRS if the 22,000 represented 90-100% of my salary?

]]> By: Clint http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-161438 Clint Sat, 26 Nov 2011 01:53:19 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-161438 Clifton, It's a good question. Because your total pre-tax compensation of $16,640 is less than $49,000, $16,640 is the maximum amount that can be contributed to your 401k in the calendar year. To answer the specific questions you asked: 1. Yes, as long as your plan allows it, you could contribute 100% of your pre-tax earnings to your 401k, but you would be at your limit and not eligible for employer contributions. 2. In the this scenario your own contributions are reaching your 401k max for the year, so you would not be eligible to receive any of the 100% employer match. The best thing to do in this scenario would be to contribute 50% of your pre-tax compensation to your 401k, and receive the matching 50% from your employer. You would reach and the full $16,640 allowed and you would have some money left in the paycheck. Clifton,

It’s a good question. Because your total pre-tax compensation of $16,640 is less than $49,000, $16,640 is the maximum amount that can be contributed to your 401k in the calendar year. To answer the specific questions you asked:

1. Yes, as long as your plan allows it, you could contribute 100% of your pre-tax earnings to your 401k, but you would be at your limit and not eligible for employer contributions.
2. In the this scenario your own contributions are reaching your 401k max for the year, so you would not be eligible to receive any of the 100% employer match.

The best thing to do in this scenario would be to contribute 50% of your pre-tax compensation to your 401k, and receive the matching 50% from your employer. You would reach and the full $16,640 allowed and you would have some money left in the paycheck.

]]> By: Clifton http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-160894 Clifton Thu, 24 Nov 2011 16:12:50 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-160894 @Clint Ok I have a quick question. First let me say that I am positive this article is explained very well but as I am very young and just learning about 401k's, I'm a bit ignorant on the subject. Ok, that being said, my question is.... First, If I have a job (beginning 2012 [new limit: $17,000]) making $8/hr, 40hrs week, this would be $320/wk before taxes. Is it possible to contribute the entire $320/wk for 52 weeks totaling $16,640??? I realize no one would ever do this but I am just curious if this is possible. 2nd, if my employer states that they match 100% of my contribution (I realize that this may be rare or even nonexistent but hypothetically speaking) would that mean that they would also contribute $320/wk for 52wks totaling an additional $16,640???? Making my total contribution for the year $16,640 x 2= $33,280???? Side note: If those were really stupid questions, sorry. I'm only 19 :) And if your wondering, the part of your article that I was a bit confused about is as follows: *The TOTAL amount that can be contributed BETWEEN EMPLOYEE AND EMPLOYER CONTRIBUTIONS is the section 415 limit, which is the LESSER of 100% of the employees compensation or $49,000 for 2010 and 2011. It's the "LESSER of 100%" part that I was confused about. Basically, if I am already contributing my entire check, 100% (assuming that's even possible) and my employer contributes additional monies, the total contribution for the year would in fact be MORE than 100% of my compensation since I already contributed 100%. Since you wrote that it is the LESSER of 100% of the employees TOTAL compensation or $49,000 (2010,2011), I am a bit confused. Sorry. @Clint

Ok I have a quick question. First let me say that I am positive this article is explained very well but as I am very young and just learning about 401k’s, I’m a bit ignorant on the subject. Ok, that being said, my question is….

First, If I have a job (beginning 2012 [new limit: $17,000]) making $8/hr, 40hrs week, this would be $320/wk before taxes. Is it possible to contribute the entire $320/wk for 52 weeks totaling $16,640??? I realize no one would ever do this but I am just curious if this is possible.

2nd, if my employer states that they match 100% of my contribution (I realize that this may be rare or even nonexistent but hypothetically speaking) would that mean that they would also contribute $320/wk for 52wks totaling an additional $16,640????

Making my total contribution for the year $16,640 x 2= $33,280????

Side note: If those were really stupid questions, sorry. I’m only 19 :) And if your wondering, the part of your article that I was a bit confused about is as follows:

*The TOTAL amount that can be contributed BETWEEN EMPLOYEE AND EMPLOYER CONTRIBUTIONS is the section 415 limit, which is the LESSER of 100% of the employees compensation or $49,000 for 2010 and 2011.

It’s the “LESSER of 100%” part that I was confused about. Basically, if I am already contributing my entire check, 100% (assuming that’s even possible) and my employer contributes additional monies, the total contribution for the year would in fact be MORE than 100% of my compensation since I already contributed 100%. Since you wrote that it is the LESSER of 100% of the employees TOTAL compensation or $49,000 (2010,2011), I am a bit confused. Sorry.

]]> By: Bernadette Russell http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-141334 Bernadette Russell Wed, 12 Oct 2011 15:59:50 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-141334 I understand that $49M is the total a person canput into a 401K (which includes the person's max of $16.5M & the rest from an employer). But what about also putting $5M (or $6M if ofer 50) into an IRA. That would make that person's total deferred amount $54M. Is that OK? I understand that $49M is the total a person canput into a 401K (which includes the person’s max of $16.5M & the rest from an employer). But what about also putting $5M (or $6M if ofer 50) into an IRA. That would make that person’s total deferred amount $54M. Is that OK?

]]> By: Confusion Reigns http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-138753 Confusion Reigns Sat, 08 Oct 2011 05:21:55 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-138753 For the another resource opining the $54,400 maximum 401K contribution limit for over 50's see: http://ebrworld.com/news/ and select the 2011.pdf link under the "FALL 2010" title. For the another resource opining the $54,400 maximum 401K contribution limit for over 50′s see:
http://ebrworld.com/news/ and select the 2011.pdf link under the “FALL 2010″ title.

]]> By: Confusion Reigns http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-138734 Confusion Reigns Sat, 08 Oct 2011 04:51:10 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-138734 Dear Needhelp, Depending on the rules of your company's 401K plan, you may be able to make after-tax contributions to meet the employee contribution percentage. My company allows both pre-tax and after-tax contributions to allow the employee to meet the company match contribution percentage. As far as the exceeding the $16.5K, I would think that if you are only allowed pre-tax contributions, the contributions would be stopped by your payroll department once you reach the $16.5K limit. This is how my pre-tax contributions are handled. However, my company allows the pre-tax contribution to change over to after-tax contributions so as to continually meet the company match through to the end of the year and thus maximize the company's contribution. If you don't have that option then I would call someone in your payroll or HR department for help. My question - what is the maximum 2011 401K contribution limit? Nearly all the websites, inlcuding this one, and experts I have asked indicate that the maximum 2011 401K contribution limit is $49,000, which I understand. However, as other people have asked here, does this include the catch-up contributions? I've checked the IRS website and am still confused as there seems to be conflicting information: http://www.irs.gov/retirement/participant/article/0,,id=211334,00.html indicates that "Catch-up contributions are not subject to the above limit." referring to the $49,000 limit. Which to me, would mean that the total contribution limit for people making the maximum catch-up contribution of $5,500 is $54,500. However: http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html under the "Additional Limits" subtitle at the bottom of the page, indicates the maximum contribution from all sources (pre-tax, after-tax, employer, is $49,000. Thus an apparent contridiction, at least from where I stand. I even asked the company administering my company's 401K plan and I got two different answers: $49,000 including catch-up contributions and $54,500 ($49,000 + $5,500 catch-up contribution). Maybe the id=211334 webpage came after the id=151786 webpage to clarify this issue? Has anyone received an answer to this question directly from the IRS? I tried today, but didn't have the time to wait on the phone long enough to get to speak to anyone. Also, Pub 525 doesn't go into any detail to clarify the catch-up contribution scenario. Dear Needhelp,

Depending on the rules of your company’s 401K plan, you may be able to make after-tax contributions to meet the employee contribution percentage. My company allows both pre-tax and after-tax contributions to allow the employee to meet the company match contribution percentage.

As far as the exceeding the $16.5K, I would think that if you are only allowed pre-tax contributions, the contributions would be stopped by your payroll department once you reach the $16.5K limit. This is how my pre-tax contributions are handled. However, my company allows the pre-tax contribution to change over to after-tax contributions so as to continually meet the company match through to the end of the year and thus maximize the company’s contribution. If you don’t have that option then I would call someone in your payroll or HR department for help.

My question – what is the maximum 2011 401K contribution limit?

Nearly all the websites, inlcuding this one, and experts I have asked indicate that the maximum 2011 401K contribution limit is $49,000, which I understand. However, as other people have asked here, does this include the catch-up contributions? I’ve checked the IRS website and am still confused as there seems to be conflicting information:
http://www.irs.gov/retirement/participant/article/0,,id=211334,00.html
indicates that “Catch-up contributions are not subject to the above limit.” referring to the $49,000 limit. Which to me, would mean that the total contribution limit for people making the maximum catch-up contribution of $5,500 is $54,500. However:
http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html
under the “Additional Limits” subtitle at the bottom of the page, indicates the maximum contribution from all sources (pre-tax, after-tax, employer, is $49,000. Thus an apparent contridiction, at least from where I stand. I even asked the company administering my company’s 401K plan and I got two different answers: $49,000 including catch-up contributions and $54,500 ($49,000 + $5,500 catch-up contribution).

Maybe the id=211334 webpage came after the id=151786 webpage to clarify this issue?

Has anyone received an answer to this question directly from the IRS? I tried today, but didn’t have the time to wait on the phone long enough to get to speak to anyone.

Also, Pub 525 doesn’t go into any detail to clarify the catch-up contribution scenario.

]]> By: Needhelp http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/comment-page-1/#comment-116969 Needhelp Fri, 19 Aug 2011 01:23:56 +0000 http://www.accumulatingmoney.com/does-the-401k-max-contribution-limit-include-the-employer-match/#comment-116969 Good discussions. I need help. I have a 401K with my employer and it is invested in prudential. With my current rate of contribution, I will exceed the $16.5K by year end (by $2k or so). However, if I lower my %, I would lose the contribution matching I am getting from my employer. What happens if my (own) contribution exceed $16.K? Do I have to fill out other forms to pay the tax on it? Is there a work around so I do not lose the matching ? Please advise. Thank you. Good discussions. I need help. I have a 401K with my employer and it is invested in prudential. With my current rate of contribution, I will exceed the $16.5K by year end (by $2k or so). However, if I lower my %, I would lose the contribution matching I am getting from my employer. What happens if my (own) contribution exceed $16.K? Do I have to fill out other forms to pay the tax on it? Is there a work around so I do not lose the matching ? Please advise. Thank you.

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