401k Match Question

[Willenium2010]

Originally Posted by Dismal Science

Good point. If someone planned to leave the company in the first half of the year I can see them juicing up the contributions just to get the annual company match before leaving. Then they could use the same trick at their new company to effectively get an outsize match for the calendar year.

I have to imagine there would be systems in place to prevent this "gaming" of the system.

At my company you have to wait a full 12 months before company will start matching 50% up to 6%. Ergo, trick solved.

[Kenny]

Originally Posted by wooHoo

Depends on the wording of the plan.

It can be written both ways.

How your match is contributed to the plan will also depend on the wording of the plan and administrative practice. Many companies like to deposit the match at the same time as the initial contribution being matched. However, they legally have until 8.5 months following the end of the plan year to fund the matching contribution.

[snoo]

Originally Posted by Kenny

How your match is contributed to the plan will also depend on the wording of the plan and administrative practice. Many companies like to deposit the match at the same time as the initial contribution being matched. However, they legally have until 8.5 months following the end of the plan year to fund the matching contribution.

Definitely depends on wording. I know someone who maxed out the 401(k) after 8 months. What happened to them is that the company waited until the end of the year and then they got the rest of the rest of the match.

[Woodrow]

No matter how it is supposed to work, someone in your payroll department could mess it up. I make sure to spread my contributions over the year for this reason.

[Ionic Order]

Originally Posted by Loner

They aren't going to give you your match ahead of time because until you've earned the salary you haven't accrued the benefit.

I believe you're talking about benefit vesting? Benefit accrual is a term more commonly used for DB plans.

[The President]

Originally Posted by HiLine

I believe you're talking about benefit vesting? Benefit accrual is a term more commonly used for DB plans.

The benefit is a match on 5% of salary. You may be 100% vested, but even if you put in 30% of your salary for a month, you have only accrued a match of 5%. It would take 6 more months to accrue the full match against the 30%.

When this is actually given to you may vary. I think my employer does it sometime after the end of the year, so if you put in 30% for two months, you would get a match on the first 5% when it is deposited, then the additional match that has been accrued on the full deposit sometime early in following year.

[Fish Actuary]

Originally Posted by SharksFan08

If a company matches, say, 100% up to 5% of income, is that 5% cap applied per pay period, or as a percent of annual salary? In other words, if I contribute 30% for the first part of the year and then hit the $17,000 limit and contribute 0% for the rest of the year, am I leaving company match money on the table?

Wouldn't it be more efficient to ask your payroll department or HR how this works and get it in writing seeing as it varies by employer?

[Pills]

Check your SPD for "true-ups". That's the common term documents use if your employer is funding the match with the payroll. If there are true-ups in there, the employer will make the corrections, making the match coincide with the formula over the total period, at the end of the year (or at another set period).

I'm a little unsure if a Safe Harbor match must be exact.

IMO, it's must easier for an IRS auditor to look at a contribution report and see a number that matches a) the formula, and b) the deposit, than having deposits stop in the middle of the year. So, I usually write my documents this way. My clients that deposit their match with payroll are used to seeing my match correction sheets with their valuations. It's also rather easy to explain to them, and I've never had any problems with it.

[SharksFan08]

Originally Posted by Fish Actuary

Wouldn't it be more efficient to ask your payroll department or HR how this works and get it in writing seeing as it varies by employer?

Now that I'm aware that it varies by employer, it certainly would. Thanks, Fish Actuary!

[Delothus]

Originally Posted by Fish Actuary

Wouldn't it be more efficient to ask your payroll department or HR how this works and get it in writing seeing as it varies by employer?

Might get a better answer from the recordkeeper/TPA since they should be the ones coming back to the plan sponsors( your employer) around plan year end and letting them know the amounts needed to true up certain accounts.

Another resource would be any Broker/RIA...the plan may have