Contributing the entire Year 401K in one Pay period allowed?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Wandering
Posts: 19
Joined: Wed Jan 20, 2016 6:12 pm

Contributing the entire Year 401K in one Pay period allowed?

Post by Wandering » Sat May 27, 2017 1:09 pm

I want to make entire 401K Employee Salary Deferral (18K+6K catch-up, Total 48K for both )for me and my wife in one pay. is this allowed or is there any restrictions on how much I can contribute per pay period ?

I have a solo 401K (Individual 401k) Plan. My wife and I are only employees with no other employees.

Thanks

tyrnup13
Posts: 55
Joined: Wed Aug 07, 2013 7:59 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by tyrnup13 » Sat May 27, 2017 1:18 pm

I contribute the full $18,000 to my 401k every January.

dbltrbl
Posts: 865
Joined: Thu Mar 01, 2007 11:52 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by dbltrbl » Sat May 27, 2017 1:21 pm

Yes if you make that in one month.

Pessimist55
Posts: 34
Joined: Thu May 14, 2015 12:16 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by Pessimist55 » Sat May 27, 2017 1:22 pm

Some companies restrict you to maximum% allowed. Varies from company to company

mhalley
Posts: 5179
Joined: Tue Nov 20, 2007 6:02 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by mhalley » Sat May 27, 2017 1:25 pm

I don't think it is a problem as long as you don't exceed the max contribution limit. I see many posts on the net about front loading 401ks but can't find anything specific about doing it in one pay period.

MrDrinkingWater
Posts: 65
Joined: Tue Dec 23, 2014 11:30 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by MrDrinkingWater » Sat May 27, 2017 1:35 pm

Just wondering, can your business "give" you, as an employee, a company matching contribution?

Wandering
Posts: 19
Joined: Wed Jan 20, 2016 6:12 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by Wandering » Sat May 27, 2017 1:41 pm

No; But the plan provide profit sharing. We both are 50+, so planning to contribute 24K each (48K) during this pay period

Thanks for all responses
MrDrinkingWater wrote:Just wondering, can your business "give" you, as an employee, a company matching contribution?

IceArdor
Posts: 1
Joined: Sat May 27, 2017 1:33 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by IceArdor » Sat May 27, 2017 1:47 pm

This is probably fine since you're self employed.

But for readers who are not self employed and have company-matched retirement plans, read on.

At my workplace, we were warned that the company match of 2/3rds up to 6% employee (4% match) is determined based on the employee's contribution from each pay period. If I ever have a paycheck where my contribution falls below 6%, I'll get less than the maximum 4% match, and there's no way to ever get that match back.

If I contribute $18,000 before the end of the year, I am no longer able to make contributions to my 401k that year, and therefore will miss out on the 4% match for those pay periods.

So I set my Fidelity 401k to contribute $18,000/(my annual income), rounded down to a whole percent, for each pay period. I wish Fidelity had an option to contribute an amount that will achieve $18,000 by Dec 31.

User avatar
badbreath
Posts: 643
Joined: Mon Jul 18, 2016 7:50 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by badbreath » Sat May 27, 2017 5:37 pm

IceArdor

But for readers who are not self employed and have company-matched retirement plans, read on.

At my workplace, we were warned that the company match of 2/3rds up to 6% employee (4% match) is determined based on the employee's contribution from each pay period. If I ever have a paycheck where my contribution falls below 6%, I'll get less than the maximum 4% match, and there's no way to ever get that match back.

If I contribute $18,000 before the end of the year, I am no longer able to make contributions to my 401k that year, and therefore will miss out on the 4% match for those pay periods.

So I set my Fidelity 401k to contribute $18,000/(my annual income), rounded down to a whole percent, for each pay period. I wish Fidelity had an option to contribute an amount that will achieve $18,000 by Dec 31.
This is true you need to find out if your company does a true up or not. My company does a true up so by April or May i am done with 401k in February of the next year the match shows up for the missing months.
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

User avatar
whaleknives
Posts: 1210
Joined: Sun Jun 24, 2012 7:19 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by whaleknives » Sat May 27, 2017 8:54 pm

mhalley wrote:I don't think it is a problem as long as you don't exceed the max contribution limit. I see many posts on the net about front loading 401ks but can't find anything specific about doing it in one pay period.
I tried putting 100% of my last paycheck in my corporate 401(k), and ran up against this limitation: I had to be paid enough wages to deduct the required Social Security and Medicare taxes, and medical and dental insurance. My maximum 401(k) employee contribution was 89% of gross.
_______________
Edited after reviewing my last pay stub.
Last edited by whaleknives on Sat May 27, 2017 10:28 pm, edited 2 times in total.
"I'm an indexer. I own the market. And I'm happy." (John Bogle, "BusinessWeek", 8/17/07) ☕ Maritime signal flag W - Whiskey: "I require medical assistance."

avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by avalpert » Sat May 27, 2017 9:27 pm

Since you mention paychecks I assume you are an S-Corp that issues W2s to you and your spouse? If so, assuming your plan documents and payroll company don't limit the percent you can defer you should be able to do 100% after social security/medicare and any other pre-tax deductions.

If you aren't an S-Corp but instead report as sole proprietors then you don really have pay periods - you can make the contributions as soon as you are certain you have earned enough net income (after subtracting the self-employment tax deduction) to cover the amount.

TropikThunder
Posts: 641
Joined: Sun Apr 03, 2016 5:41 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by TropikThunder » Sat May 27, 2017 10:01 pm

IceArdor wrote:This is probably fine since you're self employed.

But for readers who are not self employed and have company-matched retirement plans, read on.

At my workplace, we were warned that the company match of 2/3rds up to 6% employee (4% match) is determined based on the employee's contribution from each pay period. If I ever have a paycheck where my contribution falls below 6%, I'll get less than the maximum 4% match, and there's no way to ever get that match back.

If I contribute $18,000 before the end of the year, I am no longer able to make contributions to my 401k that year, and therefore will miss out on the 4% match for those pay periods.

So I set my Fidelity 401k to contribute $18,000/(my annual income), rounded down to a whole percent, for each pay period. I wish Fidelity had an option to contribute an amount that will achieve $18,000 by Dec 31.
This is not an ideal solution, but you could keep an eye on your contribution as the year goes by and then jack it up for the last pay period. The payroll software will cap you at $18,000 so you can't go over. Just don't forget to reset if for January. :twisted:

dcabler
Posts: 310
Joined: Wed Feb 19, 2014 11:30 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by dcabler » Sun May 28, 2017 7:59 am

My company allows up to 90% to be withheld per pay period. We get paid monthly and it takes two paychecks to get to the max amount (I'm over 50). Presumably the 90% comes from them wanting to have money left over for other deductions (medical insurance premium, for example).

I've been doing this for the last few years, mainly because in my industry, layoffs tend to occur at mid year or end of the year. So I want to layoff-proof my 401K deductions.

Oh, and it worked - my company is shutting down its office where I live at the end of June. And I already have the next gig lined up. :sharebeer

MikeG62
Posts: 527
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by MikeG62 » Sun May 28, 2017 8:24 am

badbreath wrote:
IceArdor

But for readers who are not self employed and have company-matched retirement plans, read on.

At my workplace, we were warned that the company match of 2/3rds up to 6% employee (4% match) is determined based on the employee's contribution from each pay period. If I ever have a paycheck where my contribution falls below 6%, I'll get less than the maximum 4% match, and there's no way to ever get that match back.

If I contribute $18,000 before the end of the year, I am no longer able to make contributions to my 401k that year, and therefore will miss out on the 4% match for those pay periods.

So I set my Fidelity 401k to contribute $18,000/(my annual income), rounded down to a whole percent, for each pay period. I wish Fidelity had an option to contribute an amount that will achieve $18,000 by Dec 31.
This is true you need to find out if your company does a true up or not. My company does a true up so by April or May i am done with 401k in February of the next year the match shows up for the missing months.
Agree with above. However, one thing to be mindful of is if you leave your employer before the true-up is done you "may not" be entitled to it. This happened to me my last year of work. Contributed the max ($24K) in the first two months of the year (then retired). Company plan required I be employed on the day the true up was done (around May) in order to get it. I was not and therefore did not get the true-up. This is plan specific, so check your plan document if you think you might fall into this position (i.e., leave employer before the true-up is done and have front loaded your 401k contributions in the current or prior year).

User avatar
Solair of Astora
Posts: 27
Joined: Thu Aug 20, 2015 12:20 pm
Location: USA

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by Solair of Astora » Sun May 28, 2017 8:44 am

dcabler wrote:My company allows up to 90% to be withheld per pay period. We get paid monthly and it takes two paychecks to get to the max amount (I'm over 50). Presumably the 90% comes from them wanting to have money left over for other deductions (medical insurance premium, for example).

I've been doing this for the last few years, mainly because in my industry, layoffs tend to occur at mid year or end of the year. So I want to layoff-proof my 401K deductions.

Oh, and it worked - my company is shutting down its office where I live at the end of June. And I already have the next gig lined up. :sharebeer
No, the 90% is just set by the employer, or maybe the custodian. That 90% I believe is 90% after all applicable deductions. My employer allows for 100% contribution to the 457 account and I set it as such one month. About a day after I did that I got a call from payroll asking me "Are you really sure you want to do that?"

I'm sure they get a lot of folks fat-fingering 10% into 100% that call complaining that they want their paycheck back after it's already been contributed. Getting that money back after it's contributed doesn't happen of course. Your employer may have it set to 90% to avoid the accidental 100% contribution election. My employer also did clarify that all deductions, insurance, parking, etc. would be taken out of the check and it would be 100% of what was left over at the end.
The forum's premier source of heliolatry.

User avatar
segfault
Posts: 431
Joined: Thu Jun 21, 2007 4:51 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by segfault » Sun May 28, 2017 8:51 am

My employer doesn't do a true-up on the match, so I set the percentage deferral to contribute an even amount each pay period. Can get tricky if you get a raise mid-year. I echo the sentiment that, for those who aren't self-employed, it's important to know whether your company does a true-up.

ERISA Stone
Posts: 1374
Joined: Tue Jun 24, 2014 8:54 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by ERISA Stone » Sun May 28, 2017 10:52 am

MikeG62 wrote:
badbreath wrote:
IceArdor

But for readers who are not self employed and have company-matched retirement plans, read on.

At my workplace, we were warned that the company match of 2/3rds up to 6% employee (4% match) is determined based on the employee's contribution from each pay period. If I ever have a paycheck where my contribution falls below 6%, I'll get less than the maximum 4% match, and there's no way to ever get that match back.

If I contribute $18,000 before the end of the year, I am no longer able to make contributions to my 401k that year, and therefore will miss out on the 4% match for those pay periods.

So I set my Fidelity 401k to contribute $18,000/(my annual income), rounded down to a whole percent, for each pay period. I wish Fidelity had an option to contribute an amount that will achieve $18,000 by Dec 31.
This is true you need to find out if your company does a true up or not. My company does a true up so by April or May i am done with 401k in February of the next year the match shows up for the missing months.
Agree with above. However, one thing to be mindful of is if you leave your employer before the true-up is done you "may not" be entitled to it. This happened to me my last year of work. Contributed the max ($24K) in the first two months of the year (then retired). Company plan required I be employed on the day the true up was done (around May) in order to get it. I was not and therefore did not get the true-up. This is plan specific, so check your plan document if you think you might fall into this position (i.e., leave employer before the true-up is done and have front loaded your 401k contributions in the current or prior year).
I think there may be a misunderstanding here. I don't know how an employer could write a plan document so that the payroll match has different requirements than the true-up. If you met the requirements for one, you had to meet the requirements for the other. Is it possible the contribution made in the subsequent year is a profit sharing contribution? It sounds like it based on the last day rule.

Also, you said you retired. Did you meet retirement requirements according to the plan? If so, you might not need to satisfy the last day requirement.

avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by avalpert » Sun May 28, 2017 11:43 am

dcabler wrote:My company allows up to 90% to be withheld per pay period. We get paid monthly and it takes two paychecks to get to the max amount (I'm over 50). Presumably the 90% comes from them wanting to have money left over for other deductions (medical insurance premium, for example).

I've been doing this for the last few years, mainly because in my industry, layoffs tend to occur at mid year or end of the year. So I want to layoff-proof my 401K deductions.

Oh, and it worked - my company is shutting down its office where I live at the end of June. And I already have the next gig lined up. :sharebeer
If I understand you correctly you have contributed your full allocation for the year, will be laid-off and starting a new job somewhere else. That runs the risk of not being able to contribute at the new employer and earning potential matching funds from the employer there - that can be more costly then the advantage of contributing funds 6 month early, which is why I don't rush my contributions.

danaht
Posts: 427
Joined: Sun Oct 18, 2015 11:28 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by danaht » Sun May 28, 2017 12:25 pm

As long as you make $18,000 + enough to pay all of the employee payroll taxes + any company deductions (like healthcare premiums) in one month - then you probably can. Be careful - you might lose some (or most) of your company's 401k employer match if you do this. Some companies have policies that only allow the maximum employer match if you spread out the contributions evenly the entire year. So be careful before doing this!

dcabler
Posts: 310
Joined: Wed Feb 19, 2014 11:30 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by dcabler » Sun May 28, 2017 1:56 pm

Solair of Astora wrote:
dcabler wrote:My company allows up to 90% to be withheld per pay period. We get paid monthly and it takes two paychecks to get to the max amount (I'm over 50). Presumably the 90% comes from them wanting to have money left over for other deductions (medical insurance premium, for example).

I've been doing this for the last few years, mainly because in my industry, layoffs tend to occur at mid year or end of the year. So I want to layoff-proof my 401K deductions.

Oh, and it worked - my company is shutting down its office where I live at the end of June. And I already have the next gig lined up. :sharebeer
No, the 90% is just set by the employer, or maybe the custodian. That 90% I believe is 90% after all applicable deductions. My employer allows for 100% contribution to the 457 account and I set it as such one month. About a day after I did that I got a call from payroll asking me "Are you really sure you want to do that?"

I'm sure they get a lot of folks fat-fingering 10% into 100% that call complaining that they want their paycheck back after it's already been contributed. Getting that money back after it's contributed doesn't happen of course. Your employer may have it set to 90% to avoid the accidental 100% contribution election. My employer also did clarify that all deductions, insurance, parking, etc. would be taken out of the check and it would be 100% of what was left over at the end.
Nope, checked my pay stub from beginning of the year. The 90% was off of the gross amount before any other deductions.

MikeG62
Posts: 527
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by MikeG62 » Mon May 29, 2017 7:40 am

ERISA Stone wrote:
MikeG62 wrote:
Agree with above. However, one thing to be mindful of is if you leave your employer before the true-up is done you "may not" be entitled to it. This happened to me my last year of work. Contributed the max ($24K) in the first two months of the year (then retired). Company plan required I be employed on the day the true up was done (around May) in order to get it. I was not and therefore did not get the true-up. This is plan specific, so check your plan document if you think you might fall into this position (i.e., leave employer before the true-up is done and have front loaded your 401k contributions in the current or prior year).
I think there may be a misunderstanding here. I don't know how an employer could write a plan document so that the payroll match has different requirements than the true-up. If you met the requirements for one, you had to meet the requirements for the other. Is it possible the contribution made in the subsequent year is a profit sharing contribution? It sounds like it based on the last day rule.

Also, you said you retired. Did you meet retirement requirements according to the plan? If so, you might not need to satisfy the last day requirement.
Not looking to debate the rules with someone whose screen name contains the word EIRISA.

However, I will add a bit more details about my situation for clarity.

I left my employer in Feb of 2016 (was not a retirement with the consent of the company, but job elimination following my employer being acquired). I did not receive a true-up contribution for either 2015 or 2016 (checked my account transaction history this morning noting that the last true-up contribution I received (~$1,500) was in March of 2015 applicable to calendar year 2014).

I did contact corp benefits in mid 2016 inquiring on the status of my 2015 true-up and was told I was not entitled to it as I had to be employed on the day the true-up was done. I recall getting and reading the 401k plan document and noted the wording requiring employment on the day of the true-up. Wish I had kept the document as I would post the exact language here.

The true-up was not a profit sharing contribution. My employer was fairly large (annual revenues >$2.5B and 401K plan asset were around $1B).

If their 401k plan document is in violation of IRS law, I'd like to know that. Can you provide a link to any rules which spell this out?

ERISA Stone
Posts: 1374
Joined: Tue Jun 24, 2014 8:54 am

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by ERISA Stone » Fri Jul 14, 2017 9:59 am

MikeG62 wrote:
ERISA Stone wrote:
MikeG62 wrote:
Agree with above. However, one thing to be mindful of is if you leave your employer before the true-up is done you "may not" be entitled to it. This happened to me my last year of work. Contributed the max ($24K) in the first two months of the year (then retired). Company plan required I be employed on the day the true up was done (around May) in order to get it. I was not and therefore did not get the true-up. This is plan specific, so check your plan document if you think you might fall into this position (i.e., leave employer before the true-up is done and have front loaded your 401k contributions in the current or prior year).
I think there may be a misunderstanding here. I don't know how an employer could write a plan document so that the payroll match has different requirements than the true-up. If you met the requirements for one, you had to meet the requirements for the other. Is it possible the contribution made in the subsequent year is a profit sharing contribution? It sounds like it based on the last day rule.

Also, you said you retired. Did you meet retirement requirements according to the plan? If so, you might not need to satisfy the last day requirement.
Not looking to debate the rules with someone whose screen name contains the word EIRISA.

However, I will add a bit more details about my situation for clarity.

I left my employer in Feb of 2016 (was not a retirement with the consent of the company, but job elimination following my employer being acquired). I did not receive a true-up contribution for either 2015 or 2016 (checked my account transaction history this morning noting that the last true-up contribution I received (~$1,500) was in March of 2015 applicable to calendar year 2014).

I did contact corp benefits in mid 2016 inquiring on the status of my 2015 true-up and was told I was not entitled to it as I had to be employed on the day the true-up was done. I recall getting and reading the 401k plan document and noted the wording requiring employment on the day of the true-up. Wish I had kept the document as I would post the exact language here.

The true-up was not a profit sharing contribution. My employer was fairly large (annual revenues >$2.5B and 401K plan asset were around $1B).

If their 401k plan document is in violation of IRS law, I'd like to know that. Can you provide a link to any rules which spell this out?
I would need to see a document to confirm, but if your plan year is on a calendar year basis, and you were employed on 12/31/2015, then you met the last day rule for 2015. The company cannot "set" the last day to be the date they actually deposit the contribution. It should be defined in the plan document in connection with the plan year.

Regarding retirement, it doesn't matter how you actually left the company. For retirement plan purposes, "retirement" is defined in the plan document. It doesn't matter if you were stealing from the company (I don't think you were, just an extreme example). If you met the retirement provisions of the document, you would be entitled to those funds.

I suppose that even though I've never seen this design, it could be done, but I question the added testing complexity just for the sake of having a last day rule for the true-up. But it likely makes sense for your former employer from a profit perspective. They probably save far more than the cost of additional testing.

Sorry about your situation. I'm not trying to drum up a stressful issue for you. I just want to make sure posters on this site are aware of their options, in case they ever run across a similar situation.

MikeG62
Posts: 527
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

Re: Contributing the entire Year 401K in one Pay period allowed?

Post by MikeG62 » Fri Jul 14, 2017 12:40 pm

ERISA Stone,

No worries at all. Your post is helpful for sure.

In my case, I think they paid me what they legally owed me. However, even if I am wrong about that, I signed a legal waiver of any claims against them as a condition of receiving the large change in control separation payment to which I was entitled. So for me this is now water under the bridge. Also, true-up amount is immaterial in the grand scheme of things.

If I can convince an old colleague to send me the detailed plan description I may do that just to close the loop on this. I do recall reading this when I was there and my recollection is that I had to be there on the date the true-up was done to get the true-up itself.

Company plan was fairly large (almost $1B in plan assets at the time I left the company).

Post Reply