Dec 5

I have two questions about my employer retirement 401k contributions.
1. The maximum I can put in is $15,500 for 2007. But I started in mid year. Is it prorated from the time I started? Example: I started on July 1, is the contribution $15,500/2 = $7,750.
2. My employer matching is 2:1 up to a maximum of 6% of salary. Example: $50,000 annual salary, employer contribution is $3,000. For every dollar I put in, they will put in $0.50. Is the employer matching of $3,000 included in the $15,500 which means the employee total amount invested is $12,500, or, is it $15,500 from employee plus $3,000 from employer which would equal $18,500. I think it’s the former but just want to check.

3 comments so far...

  • Michael Said on December 5th, 2009 at 5:35 pm:

    part1) No it is not prorated. The annual limit remains 15,500. The only restriction is how much can you aford to put in per week. Also, the plan needs to be a qualified’ plan. To do that your company must maintain a ratio of contributions between ‘highly compensated employees’ and all other employees. This MAY result in a maximum percentage that yur employer allows you to contribute each week, and that maximum percentage MAY prevent you from maxing out.

    If you are over 50 you are allowed an additional separate 5000 ‘catch up’ contribution.

    Part 2) No, the employer portion does not count toward your maximum. You can contribute 15,500 and your employer an additional amount.

  • SCH Said on December 5th, 2009 at 5:59 pm:

    An employee can contribute a maximum of $15,500 per calander year to their 401k…it is not prorated if you were to start a job in the middle of the year…however if you contributed to a 401k this year (not this particular companies 401k, lets say you contributed to your former employer’s 401k) that would be included in that $15,500 figure.

    No, your employer match does not count towards that $15,500…they are free to contribute what they want and it will not affect you at all.

  • ed m Said on December 5th, 2009 at 6:00 pm:

    1) no and if you are over 50 you can add an additional 5k on top of the 15K

    2) no it is in two separate accounts

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