Comments on: Strategies For Maxing Out Your 401k/403b and Company Match, True-Up Contributions http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html Personal Finance and Investing Blog Sun, 12 Feb 2012 05:06:12 +0000 hourly 1 By: jchancy http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-169471 jchancy Sun, 24 Oct 2010 19:52:32 +0000 http://www.mymoneyblog.com/?p=2620#comment-169471 Gross salary 550k , age 66, Government hospital 6% match. That would be 33k emp and 33ee. What is limit tax deferred? I feel is 23k and 23k. Could other 20 go somwhere like 457 which is available? Gross salary 550k , age 66, Government hospital 6% match. That would be 33k emp and 33ee. What is limit tax deferred? I feel is 23k and 23k.
Could other 20 go somwhere like 457 which is available?

]]> By: Jonathan http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-153395 Jonathan Wed, 05 May 2010 03:07:44 +0000 http://www.mymoneyblog.com/?p=2620#comment-153395 @Peggy - Unfortunately, from what I have read, yes they can set such limits even if much less than IRS limits. However, if you talk to your HR department or other managers, ask them why... you many convince them to raise the limits. @Peggy – Unfortunately, from what I have read, yes they can set such limits even if much less than IRS limits. However, if you talk to your HR department or other managers, ask them why… you many convince them to raise the limits.

]]> By: Peggy http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-153387 Peggy Wed, 05 May 2010 02:07:47 +0000 http://www.mymoneyblog.com/?p=2620#comment-153387 My company told me I could only have 12% of my pay (pre=tax deduction) in my 401K. It's no where near the $16,500 limit (I'm 53) they only match 1%. I would like to have 30% each pay period deducted for my 401K. Can they set a liimit like that??? My company told me I could only have 12% of my pay (pre=tax deduction) in my 401K. It’s no where near the $16,500 limit (I’m 53)
they only match 1%. I would like to have 30% each pay period deducted for my 401K. Can they set a liimit like that???

]]> By: Tonya http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-151566 Tonya Thu, 22 Apr 2010 20:04:32 +0000 http://www.mymoneyblog.com/?p=2620#comment-151566 Someone please help me understand "True Up". My company offers a Safe Harbor Match of the first 3% at dollar for dollar and the 4th & 5th % at $.50 per dollar. If I make 35K per year what should my company match be if they also "True up" at the end of each calendar year? Is the true up match based on the percentage of how much you put into your 401k account or on your salary as a whole? If a true up provision exists souldn’t my company put 4% in my 401k account every pay period regardless of whether or not I even make elected deferral contributions or max out contributions at $16,500? The salary based contribution by the employer would not count towards the $16,500 limit but instead the $49,000 limit? If I did not contribute/defer any contributions for the year at all, is my employer still required to place match funds in my account based on my annual 35K salary? Help!! Someone please help me understand “True Up”. My company offers a Safe Harbor Match of the first 3% at dollar for dollar and the 4th & 5th % at $.50 per dollar. If I make 35K per year what should my company match be if they also “True up” at the end of each calendar year? Is the true up match based on the percentage of how much you put into your 401k account or on your salary as a whole? If a true up provision exists souldn’t my company put 4% in my 401k account every pay period regardless of whether or not I even make elected deferral contributions or max out contributions at $16,500? The salary based contribution by the employer would not count towards the $16,500 limit but instead the $49,000 limit? If I did not contribute/defer any contributions for the year at all, is my employer still required to place match funds in my account based on my annual 35K salary? Help!!

]]> By: Jenny http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-124586 Jenny Fri, 20 Feb 2009 22:56:24 +0000 http://www.mymoneyblog.com/?p=2620#comment-124586 The privately owned company that I worked for recently laid off 120 of us. They have decided to not give us that portion of our company match dollars that we all had in our portfolios withour 401K They issued a letter this past July 21st and back dated to July 1st stating that this was going to happen. How can this be legal if they had already "given" you the funds? The privately owned company that I worked for recently laid off 120 of us. They have decided to not give us that portion of our company match dollars that we all had in our portfolios withour 401K They issued a letter this past July 21st and back dated to July 1st stating that this was going to happen. How can this be legal if they had already “given” you the funds?

]]> By: Ryan http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122982 Ryan Wed, 28 Jan 2009 01:21:50 +0000 http://www.mymoneyblog.com/?p=2620#comment-122982 Just to be sure I checked about the True-Up policy with my company and they actually do that at the end of the calendar year. They also automatically stop anything that goes above the $16,500 annual limit so I just made the contribution be a percentage that is higher than the percentage of the 401k limit compared to my salary. This way I will finish contributing, and maxing out the contribution, for the year well in advance. Just to be sure I checked about the True-Up policy with my company and they actually do that at the end of the calendar year. They also automatically stop anything that goes above the $16,500 annual limit so I just made the contribution be a percentage that is higher than the percentage of the 401k limit compared to my salary. This way I will finish contributing, and maxing out the contribution, for the year well in advance.

]]> By: Jason G http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122920 Jason G Mon, 26 Jan 2009 22:28:11 +0000 http://www.mymoneyblog.com/?p=2620#comment-122920 One issue I'd like to point out that bit me in 2008. I did my calculations based on pay periods as a function of the weeks in a year. I didn't take into account that our last pay period straddled the last week of 2008 and the first week of 2009. Thus, my last week of pay ended up contributing to my 2009 401k and I was something like $610 short of the $15500 max for 2008 :( I feel like I met my goal in principle :) One issue I’d like to point out that bit me in 2008. I did my calculations based on pay periods as a function of the weeks in a year. I didn’t take into account that our last pay period straddled the last week of 2008 and the first week of 2009. Thus, my last week of pay ended up contributing to my 2009 401k and I was something like $610 short of the $15500 max for 2008 :(

I feel like I met my goal in principle :)

]]> By: Kball http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122890 Kball Mon, 26 Jan 2009 16:04:15 +0000 http://www.mymoneyblog.com/?p=2620#comment-122890 Great post - things I hadn't thought about. Great post – things I hadn’t thought about.

]]> By: Jason http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122865 Jason Mon, 26 Jan 2009 01:45:37 +0000 http://www.mymoneyblog.com/?p=2620#comment-122865 ^^^ Nevermind, I understand now. ^^^ ^^^ Nevermind, I understand now. ^^^

]]> By: Jason http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122848 Jason Sun, 25 Jan 2009 18:16:50 +0000 http://www.mymoneyblog.com/?p=2620#comment-122848 Jonathan or someone please help me understand, as I am a bit confused by the example provided in the post. The 3% stated as a "match" sounds more like a salary based contribution, since it is based not on a percentage of how much you put into your 401k account but on your salary as a whole. Therefore, wouldn’t the company put $300 in your 401k account every month regardless of whether or not you maxed out your contributions at $16,500? The salary based contribution by the employer would not count towards the $16,500 limit but instead the $49,000 limit, correct? Thank you in advance for the clarification. Jonathan or someone please help me understand, as I am a bit confused by the example provided in the post. The 3% stated as a “match” sounds more like a salary based contribution, since it is based not on a percentage of how much you put into your 401k account but on your salary as a whole. Therefore, wouldn’t the company put $300 in your 401k account every month regardless of whether or not you maxed out your contributions at $16,500? The salary based contribution by the employer would not count towards the $16,500 limit but instead the $49,000 limit, correct? Thank you in advance for the clarification.

]]> By: kitty http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122826 kitty Sun, 25 Jan 2009 02:11:13 +0000 http://www.mymoneyblog.com/?p=2620#comment-122826 My employer's plan has a "match maximizer" feature: once the limit is reached the match is maximized and matching funds added if you reached the limit too early. This year we also have a "deferral maximizer" feature. This way rather than specify a fixed percentage, I can simply select to maximize my contribution. "Your contributions would have to stop at $16,500." Add $5500 catch-up starting from the year of your 50th birthday. So it is $21000. My employer has different rules for match based on when you started working or rather on what pension plan you had when all pension plans were frozen at the end of 2008: - Those who had the old defined benefit plans get 100% on first 6% deferral plus 4% employer contribution (for the most part this includes long-time employees 49 and older); - those who had defined benefit pension plan introduced 10 years ago get 100% match on first 6% plus 2% company contribution - those who didn't have any pension (those hired after 2005 if I am not mistaken), get 100% match on first 5% deferral plus 1% company contribution. So it is effectively, 10%, 8% or 6% from the employer depending on when you were hired and the years with the company (more or less). First 5-6% of this is the match and the rest is company's contribution that gets deposited regardless of your deferral percentage. Before this year those of us who had pensions got 50% on first 6%. So assuming your 50th birthday is in 2009 (my case), and you've been with the company for over 20 years and chose to stay with old retirement plan 10 years ago, you can get additional 10% of your salary in employer's money. My employer’s plan has a “match maximizer” feature: once the limit is reached the match is maximized and matching funds added if you reached the limit too early.

This year we also have a “deferral maximizer” feature. This way rather than specify a fixed percentage, I can simply select to maximize my contribution.

“Your contributions would have to stop at $16,500.”
Add $5500 catch-up starting from the year of your 50th birthday. So it is $21000.
My employer has different rules for match based on when you started working or rather on what pension plan you had when all pension plans were frozen at the end of 2008:
- Those who had the old defined benefit plans get 100% on first 6% deferral plus 4% employer contribution (for the most part this includes long-time employees 49 and older);
- those who had defined benefit pension plan introduced 10 years ago get 100% match on first 6% plus 2% company contribution
- those who didn’t have any pension (those hired after 2005 if I am not mistaken), get 100% match on first 5% deferral plus 1% company contribution.

So it is effectively, 10%, 8% or 6% from the employer depending on when you were hired and the years with the company (more or less). First 5-6% of this is the match and the rest is company’s contribution that gets deposited regardless of your deferral percentage. Before this year those of us who had pensions got 50% on first 6%.

So assuming your 50th birthday is in 2009 (my case), and you’ve been with the company for over 20 years and chose to stay with old retirement plan 10 years ago, you can get additional 10% of your salary in employer’s money.

]]> By: Tim http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122796 Tim Sat, 24 Jan 2009 07:07:51 +0000 http://www.mymoneyblog.com/?p=2620#comment-122796 Hi Anonymous - It is complex and the definitions matter. The $16,500 limit is not on total employee contributions only on "Elective Deferrals". The deferrals word is important. Despite how good a 401K can be for you, you are only deferring tax and only doing that deferral on the pretax portion of your contribution. It is only the pretax portion that is impacted by the $16,500 limitation on employee contributions. The post tax and employer match is not part of that. It's possible (have done it myself so I try to warn others) to lose part of your match if you are not careful about the timing of your contributions. Hi Anonymous -
It is complex and the definitions matter. The $16,500 limit is not on total employee contributions only on “Elective Deferrals”. The deferrals word is important. Despite how good a 401K can be for you, you are only deferring tax and only doing that deferral on the pretax portion of your contribution. It is only the pretax portion that is impacted by the $16,500 limitation on employee contributions. The post tax and employer match is not part of that. It’s possible (have done it myself so I try to warn others) to lose part of your match if you are not careful about the timing of your contributions.

]]> By: Miss M http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122783 Miss M Fri, 23 Jan 2009 18:42:41 +0000 http://www.mymoneyblog.com/?p=2620#comment-122783 My company only inputs their matching funds once a year, after the plan year has ended. I still haven't received the match for 2008 for example. So you wouldn't have to worry about this in my case. My company only inputs their matching funds once a year, after the plan year has ended. I still haven’t received the match for 2008 for example. So you wouldn’t have to worry about this in my case.

]]> By: Peter http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122780 Peter Fri, 23 Jan 2009 16:57:42 +0000 http://www.mymoneyblog.com/?p=2620#comment-122780 Add to the complications... I get paid my annual bonus in February. That bonus gets my regular (14.5%) contribution to the 401(k)... I end up maxing in around October. But the fact that I can no longer contribute to the 401(k) in October gives me two months of extra cash to cover Christmas expenses, and I've still maxed my contribution and gotten the company's 7% match maxed. Add to the complications… I get paid my annual bonus in February. That bonus gets my regular (14.5%) contribution to the 401(k)… I end up maxing in around October. But the fact that I can no longer contribute to the 401(k) in October gives me two months of extra cash to cover Christmas expenses, and I’ve still maxed my contribution and gotten the company’s 7% match maxed.

]]> By: Anonymous http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122777 Anonymous Fri, 23 Jan 2009 14:35:12 +0000 http://www.mymoneyblog.com/?p=2620#comment-122777 Tim - as explained in Jonathan's previous post, EMPLOYEE CONTRIBUTIONS are limited to $16,500. Therefore, your scenario of contributing 20% of your $200K salary is not a possibility. Your contributions would have to stop at $16,500. Tim – as explained in Jonathan’s previous post, EMPLOYEE CONTRIBUTIONS are limited to $16,500. Therefore, your scenario of contributing 20% of your $200K salary is not a possibility. Your contributions would have to stop at $16,500.

]]> By: Tim http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122759 Tim Fri, 23 Jan 2009 11:43:21 +0000 http://www.mymoneyblog.com/?p=2620#comment-122759 It's possible to hit this limitation with compensation less than $542K depending on your plan and contributions. The limit includes all types of contributions to your 401K: pretax, post-tax and matching. At my company you can do a maximum of 25% deferral (in any combination of post / pre tax you want). There is also that 'average' match on the first 6% of your pay - 100% on the first 4% and 50% on the remaining 2%. So if you make $200K and contribute the maximum 25% deferral you would reach a point where no additional contributions could be made. You have to plan out your contribution split to maximize the pretax and match but you also have to realize that the company isn't going to be able to catch you up on the true up if you've already hit the $49K. From the IRS web site: There are other limits that restrict contributions made on your behalf. In addition to the limit on elective deferrals, annual contributions to all of your accounts - this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures to your accounts - may not exceed the lesser of 100% of your compensation or $46,000 (for 2008, $49,000 for 2009). In addition, the amount of your compensation that can be taken into account when determining employer and employee contributions is limited. In 2008, the compensation limitation is $230,000; for 2009, the limit is $245,000. It’s possible to hit this limitation with compensation less than $542K depending on your plan and contributions. The limit includes all types of contributions to your 401K: pretax, post-tax and matching. At my company you can do a maximum of 25% deferral (in any combination of post / pre tax you want). There is also that ‘average’ match on the first 6% of your pay – 100% on the first 4% and 50% on the remaining 2%. So if you make $200K and contribute the maximum 25% deferral you would reach a point where no additional contributions could be made. You have to plan out your contribution split to maximize the pretax and match but you also have to realize that the company isn’t going to be able to catch you up on the true up if you’ve already hit the $49K.

From the IRS web site: There are other limits that restrict contributions made on your behalf. In addition to the limit on elective deferrals, annual contributions to all of your accounts – this includes elective deferrals, employee contributions, employer matching and discretionary contributions and allocations of forfeitures to your accounts – may not exceed the lesser of 100% of your compensation or $46,000 (for 2008, $49,000 for 2009). In addition, the amount of your compensation that can be taken into account when determining employer and employee contributions is limited. In 2008, the compensation limitation is $230,000; for 2009, the limit is $245,000.

]]> By: Jacob http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122756 Jacob Fri, 23 Jan 2009 10:48:20 +0000 http://www.mymoneyblog.com/?p=2620#comment-122756 I just noticed that I made a contribution of about $18K to my 401 K last year, what will happen? I just noticed that I made a contribution of about $18K to my 401 K last year, what will happen?

]]> By: Jonathan http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122751 Jonathan Fri, 23 Jan 2009 08:12:59 +0000 http://www.mymoneyblog.com/?p=2620#comment-122751 That is certainly possible, but it would be quite a feat. I've read reports that show that only 4% of companies match 100% of an employee's contributions on up to 6% of pay. The rest match less. At 6% match, to max out the limit you'd need a salary of $542,000 per year! :) Of course, another problem may be if you have your own Solo 401k or more than one job with a 401k plan. That is certainly possible, but it would be quite a feat. I’ve read reports that show that only 4% of companies match 100% of an employee’s contributions on up to 6% of pay. The rest match less. At 6% match, to max out the limit you’d need a salary of $542,000 per year! :)

Of course, another problem may be if you have your own Solo 401k or more than one job with a 401k plan.

]]> By: Tim http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122750 Tim Fri, 23 Jan 2009 07:58:08 +0000 http://www.mymoneyblog.com/?p=2620#comment-122750 Not everyone will have this problem but if you are a very aggressive saver you might. The IRS total limit on what can be contributed (I think 49K this year) includes your contributions and company match. So despite my company having a true up program, there are some people who miss out on it because they have already maxed out on the overall IRS contribution limit and the company can't give them any more even though the employee didn't get all the matching that they were eligible to receive. Not everyone will have this problem but if you are a very aggressive saver you might. The IRS total limit on what can be contributed (I think 49K this year) includes your contributions and company match. So despite my company having a true up program, there are some people who miss out on it because they have already maxed out on the overall IRS contribution limit and the company can’t give them any more even though the employee didn’t get all the matching that they were eligible to receive.

]]> By: farmboy http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122740 farmboy Fri, 23 Jan 2009 01:56:04 +0000 http://www.mymoneyblog.com/?p=2620#comment-122740 My company just starts taking the contributions after tax, after the 16500 limit is reached. So I contribute 2000 a month for 8 months then in the 9th month 500 is before tax and the rest is after tax. After the new year I call up and ask for them to cut a check, or just leave it in there. The match is matched no matter if it was before tax or after tax. My company just starts taking the contributions after tax, after the 16500 limit is reached. So I contribute 2000 a month for 8 months then in the 9th month 500 is before tax and the rest is after tax. After the new year I call up and ask for them to cut a check, or just leave it in there. The match is matched no matter if it was before tax or after tax.

]]> By: Over the Cubicle Wall http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122729 Over the Cubicle Wall Fri, 23 Jan 2009 00:41:52 +0000 http://www.mymoneyblog.com/?p=2620#comment-122729 I've thought this thing through myself, and you have given a pretty thorough summary. I was not aware of the true up contribution. I’ve thought this thing through myself, and you have given a pretty thorough summary. I was not aware of the true up contribution.

]]> By: Ryan http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122725 Ryan Thu, 22 Jan 2009 23:25:56 +0000 http://www.mymoneyblog.com/?p=2620#comment-122725 BTW, is there a chance that I could contribute to my 401k for 2008 in 2009? Kind of the same way one can contribute to an IRA in 2009 for 2008? BTW, is there a chance that I could contribute to my 401k for 2008 in 2009? Kind of the same way one can contribute to an IRA in 2009 for 2008?

]]> By: Ryan http://www.mymoneyblog.com/strategies-for-maxing-out-your-401k-403b-and-company-match-true-up-contributions.html#comment-122724 Ryan Thu, 22 Jan 2009 23:17:58 +0000 http://www.mymoneyblog.com/?p=2620#comment-122724 Indeed, this is a good strategy. I was doing this for two years now. However, there was one flaw in my computation. Until this year I believed that the total (my contribution + company match) needs to fit in the yearly 401k limit so while I was thinking that I maxed out the contributions I really didn't because I was computing my percentages based on (401k limit - company match) / months. However, this year I hope I'll truly max out my 401k. Indeed, this is a good strategy. I was doing this for two years now. However, there was one flaw in my computation. Until this year I believed that the total (my contribution + company match) needs to fit in the yearly 401k limit so while I was thinking that I maxed out the contributions I really didn’t because I was computing my percentages based on (401k limit – company match) / months.

However, this year I hope I’ll truly max out my 401k.

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