The problem is when you try to contribute the maximum ($18,000 in my case). They require that you specify the contribution in "whole percentages". If I had elected to contribute 18% last year, I would have come up short of the $18,000 max. So I elected to contribute 19% instead. They won't let you over-contribute so as soon as you hit the limit, your contributions stop. In my case, my last contribution was the first pay period in December. The second pay period in December, since there was no contribution from me, there was no matching contribution from my employer. This resulted in me being "shorted" one matching contribution in 2016.
So even though I contributed $18,000 in both 2015 and 2016, the total company match I received in 2016 was actually less than in 2015. I also got a raise in 2016, which should have made the match even higher because my salary was higher.
I raised the issue with my employer's HR benefits group and they dismissed my concerns several times as "works as designed" but I became a "squeaky wheel" and kept escalating it up the chain until they finally acknowledged that there actually is a problem. This is from the final email I received from them...
I understand why they want to spread out the matching contribution per pay period. They don't want someone to be able to use a really high contribution rate to get all of their match in the first few months of the year. It's better for the company cash flow if their payout is spread out evenly throughout the year. The problem is that their implementation falls down for employees who are trying to contribute the maximum.You are correct in your calculations below. [The Company] is aware of this and is working diligently with internal departments to find an appropriate change that is feasible from a systems perspective. As you know, these types of changes that touch a members pay must be looked at closely and ensure that there is no negative impact to the member.
Members will be advised of any change or decision made regarding this. At this time, our plan documents and systems are currently calculating the match as per below. We hope to find a suitable way to address this in the coming months. Please keep your eyes open for any communication that may be coming up this year regarding this concern.
Is there anything else I can do? Does this violate any kind of IRS rules if they claim to match (effectively) 2%, but fail to do so?