Lost out on 401k match for over-contributing

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ctuser1
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Joined: Sun Jan 13, 2019 7:42 pm

Lost out on 401k match for over-contributing

Post by ctuser1 »

I over-contribute to my 401k. Have been doing so for about a decade now!! This means I am done with my 401k contribution limit (18.5k last year, 19k this year) by sometime around September, and then I get big, fat paychecks for last 3 months of the year.

I got down to doing some actual spreadsheet calculations a few days ago. And then I figured out how stupid I was!!

My employer matches 5%. I am fully vested at this point! The calculation, however, is a little weird.

Monthly maximum match = base salary / 24 (bimonthly paycheck).

This means no contribution for Oct/Nov/Dec -> no match for these three months, or the last 25% of my salary.

I have been losing out on 25% of my employer match for years now!!! This is worth tens of thousands compounded over last ten years!!

Of course I promptly adjusted my withholdings to take care of this.

Am I completely SOL for the matches I have missed for the past years, or is there a way to recover the match for the past years?
livesoft
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Re: Lost out on 401k match for over-contributing

Post by livesoft »

Yes, you are SOL.

My spouse's 401(k) plan is the same way. One has to pay attention with her plan to get the complete match including on bonuses that happen in late December. That is, one needs to "reserve room" for extra unknown contributions while leaving enough money in the final paycheck to top up for the year if needed. And one has to actually make the contribution amount changes online in a timely manner 3 different times in December to accomplish all this.

Or get your company to create a "True-up plan match." Good luck with that!
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RunnersLunge
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Re: Lost out on 401k match for over-contributing

Post by RunnersLunge »

If your employer performs an annual “401k true up” then it resolves these situations. If you’ve seen that verbiage anywhere there will be a 401k true up matching contribution making the employee whole on the shorted matching amount due to front loading the 401k. It usually occurs annually and not all employers provide this feature.
Topic Author
ctuser1
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Re: Lost out on 401k match for over-contributing

Post by ctuser1 »

It seems like they do not!!

I ran the numbers. The employer contribution is exactly 20something% short of 5%*base_salary for the year 2018!! I got the match for all months up to Sept + for the bonus paycheck. Bonus check hits at the beginning of the year - and it is still a bit of a mystery for me still how they calculate the match amount for that.

The last variable I am trying to figure out is how quickly do the contribution rate change take effect. I just did it yesterday, and need to see if it changes for the 5/15 paycheck. Depending on which paycheck it starts - I may need to adjust again!!

Going forward, my plan is to just let the match happen as is till the bonus check his in Feb. At that point, I will check exactly how much of the 19k limit have I eaten up - and adjust withholding based on that!!

All these are so needlessly complicated and 'gotcha' ridden!! :oops:
mortfree
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Re: Lost out on 401k match for over-contributing

Post by mortfree »

For my bonus I am able to select a unique 401k contribution amount. So I set that to 6% to get the match.

Set up a spreadsheet and use it every year
lstone19
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Re: Lost out on 401k match for over-contributing

Post by lstone19 »

It can be tough to figure it out.

Before I retired, I was blessed with an employer that did the true-up every pay check (not as complicated as it sounds - you use YTD numbers every check to calculate the company match). So I could front-load my contributions and the company match kept coming every pay day.

OTOH, my wife's employer matches by quarter (and they're not calendar quarters - December is the first month of a quarter). And since she's a contractor with no assurance of work in January or February, she always wants to leave room so December will be fully matched if she doesn't work in January or February (as happened this year) at the risk of not maxing contributions for the year if she doesn't work in December. To further complicate things, match is on regular contributions but not catch-up contributions (she's old enough). Since they're different contributions to the company (but not to the 401k administrator), she does front-load the catch-up contributions.

Making changes to my wife's plan requires 15 calendar days so with a bi-weekly pay schedule always means changes have to lead by a full pay check.
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JoMoney
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Re: Lost out on 401k match for over-contributing

Post by JoMoney »

Sad... people need to understand how this works, and look at there pay checks to ensure they're getting what they've earned.
My employer allows me to make non-roth non-deductable after-tax 401k contributions, so once I've hit the pre-tax limit I can continue to contribute and get the matching on that money.
Not all plans allow after-tax contributions, and even in mine I had to opt in to it by logging in to the Fidelity 401k website, going to contributions, then to "Spillover Election" and changing it there
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sailaway
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Re: Lost out on 401k match for over-contributing

Post by sailaway »

JoMoney wrote: Sat May 04, 2019 8:17 am Sad... people need to understand how this works, and look at there pay checks to ensure they're getting what they've earned.
My employer allows me to make non-roth non-deductable after-tax 401k contributions, so once I've hit the pre-tax limit I can continue to contribute and get the matching on that money.
Not all plans allow after-tax contributions, and even in mine I had to opt in to it by logging in to the Fidelity 401k website, going to contributions, then to "Spillover Election" and changing it there
Image
Few places match after tax contributions. One recent poster had a situation where they would match anything, but only to the $19k limit and they lost the match if they did the mega backdoor Roth.

In other words, know thy plan.
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JoMoney
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Re: Lost out on 401k match for over-contributing

Post by JoMoney »

sailaway wrote: Sat May 04, 2019 8:21 am
JoMoney wrote: Sat May 04, 2019 8:17 am...
Few places match after tax contributions. One recent poster had a situation where they would match anything, but only to the $19k limit and they lost the match if they did the mega backdoor Roth.

In other words, know thy plan.
That's also sad to here... and even for those that do allow after-tax and matching, people need to ensure that the combined matching and contributions don't exceed the statutory maximum ($56k in 2019)
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Dottie57
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Re: Lost out on 401k match for over-contributing

Post by Dottie57 »

JoMoney wrote: Sat May 04, 2019 8:17 am Sad... people need to understand how this works, and look at there pay checks to ensure they're getting what they've earned.
My employer allows me to make non-roth non-deductable after-tax 401k contributions, so once I've hit the pre-tax limit I can continue to contribute and get the matching on that money.
Not all plans allow after-tax contributions, and even in mine I had to opt in to it by logging in to the Fidelity 401k website, going to contributions, then to "Spillover Election" and changing it there
Image
Never had that. My allowed contributions were controlled by payroll system and not by 401k rovider.
lstone19
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Re: Lost out on 401k match for over-contributing

Post by lstone19 »

Dottie57 wrote: Sat May 04, 2019 8:28 am Never had that. My allowed contributions were controlled by payroll system and not by 401k rovider.
For both my most recent 401k and my wife's current 401k, contribution percentage is selected on the 401k provider's system but passed to the employer's payroll system. Enforcement is by payroll system as provider does not know pay rate or hours.
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Earl Lemongrab
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Re: Lost out on 401k match for over-contributing

Post by Earl Lemongrab »

MegaCorp worked that way. The good thing was that when you reached the deferral limit, it would automatically switch contributions to after-tax and keep matching. So, once I became informed, I just put the contribution at the plan limit (30% in the latter years).
MathIsMyWayr
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Re: Lost out on 401k match for over-contributing

Post by MathIsMyWayr »

JoMoney wrote: Sat May 04, 2019 8:27 am
sailaway wrote: Sat May 04, 2019 8:21 am
JoMoney wrote: Sat May 04, 2019 8:17 am...
Few places match after tax contributions. One recent poster had a situation where they would match anything, but only to the $19k limit and they lost the match if they did the mega backdoor Roth.

In other words, know thy plan.
That's also sad to here... and even for those that do allow after-tax and matching, people need to ensure that the combined matching and contributions don't exceed the statutory maximum ($56k in 2019)
Once you hit the IRS total annual limit ($56k in 2019), do all the contributions (employee contribution and employer match) stop for the rest of the year automatically? Or does it depend on the plan?
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JoMoney
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Re: Lost out on 401k match for over-contributing

Post by JoMoney »

MathIsMyWayr wrote: Sun May 05, 2019 4:13 pm
JoMoney wrote: Sat May 04, 2019 8:27 am
sailaway wrote: Sat May 04, 2019 8:21 am
JoMoney wrote: Sat May 04, 2019 8:17 am...
Few places match after tax contributions. One recent poster had a situation where they would match anything, but only to the $19k limit and they lost the match if they did the mega backdoor Roth.

In other words, know thy plan.
That's also sad to here... and even for those that do allow after-tax and matching, people need to ensure that the combined matching and contributions don't exceed the statutory maximum ($56k in 2019)
Once you hit the IRS total annual limit ($56k in 2019), do all the contributions (employee contribution and employer match) stop for the rest of the year automatically? Or does it depend on the plan?
Probably depends on the plan. I've heard of people who accidentally went over the limit and had to go through the ordeal of removing the excess. So far, I've avoided ever testing to see if it would automatically stop by tracking my contributions each paycheck in a spreadsheet and ensure I make any adjustments if necessary to make sure I don't go over.
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fizxman
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Re: Lost out on 401k match for over-contributing

Post by fizxman »

Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary? It would be so much easier if I could say I want to max out my 401k so take $19,000 / 26 paychecks, then contribute that amount. This should also avoid maxing out your 401k too early and thus losing out on the company match. I can do this with my Roth IRA but I can't (at least I don't know how to) with my 401k. Instead, I have to choose a whole number for my percentage, which may change part way through the first quarter when raises go through.
MathIsMyWayr
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Re: Lost out on 401k match for over-contributing

Post by MathIsMyWayr »

fizxman wrote: Mon May 06, 2019 7:10 am Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary? It would be so much easier if I could say I want to max out my 401k so take $19,000 / 26 paychecks, then contribute that amount. This should also avoid maxing out your 401k too early and thus losing out on the company match. I can do this with my Roth IRA but I can't (at least I don't know how to) with my 401k. Instead, I have to choose a whole number for my percentage, which may change part way through the first quarter when raises go through.
It depends on the plan - percentage of whole numbers for my 401(k) and DW's 403(B) plans, and any dollar/cents amount for her 457(B).
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ctuser1
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Re: Lost out on 401k match for over-contributing

Post by ctuser1 »

Looks like I am allowed to specify a percentage of total salary for me 401k, with only one decimal point in the percent.

i.e. 8.5% is good. 8.55% is not! You have to chose either 8.5 or 8.6 in the later case.

My plan is to adjust twice - once in March to make sure I don't go over too soon, and again in Nov to make sure I *do* contribute to the max while having at least 5% contributed till that very last paycheck on Dec 31.

Edited to add....

I also spent a good part of an hour to find out if there is any "spillover" option or election page in my plan website. It does not seem like we are given any "after-tax" options after I reach the limit!!

My plan does have a Roth 401k option. I don't use that because I already to the normal Roth + as a hedge in case my tax rate in retirement is lower than my marginal tax rate today.
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jhfenton
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Re: Lost out on 401k match for over-contributing

Post by jhfenton »

ctuser1 wrote: Mon May 06, 2019 7:28 am Looks like I am allowed to specify a percentage of total salary for me 401k, with only one decimal point in the percent.

i.e. 8.5% is good. 8.55% is not! You have to chose either 8.5 or 8.6 in the later case.

My plan is to adjust twice - once in March to make sure I don't go over too soon, and again in Nov to make sure I *do* contribute to the max while having at least 5% contributed till that very last paycheck on Dec 31.
I wish I could go out to tenths of a percent. I'm limited to whole percentages, so I divide the annual limit ($19,000) by my salary and round up to start the year. At some point in the year, I will have to drop it by 1%. How soon depends on how much I rounded up. I double-check my progress as I enter the 4th quarter. (Neither my wife nor I have a true-up match either.)

Next year we turn 50, and unless our salaries increase a lot, we won't be able to afford to max out both of our 401(k)s, two Roths, and an HSA, so I won't have to monitor it as closely. :beer
THY4373
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Re: Lost out on 401k match for over-contributing

Post by THY4373 »

Sorry for your matching loss OP. As others have stated this is where you really need to know your plan. My plan is same as yours where there is no true up. My ex's plan does true up. Also my plan will match on after-tax non-Roth contributions and I had a friend at work who over contributed and that is how he managed to get around that issue. My plan also has hard caps so you cannot over contribute. So I set my contributions to just cross the thresholds during last pay check. These get adjusted down slightly so I hit my max contribution and max match. My company used to create a spreadsheet to help folks calculate this. They no longer do but I now adjust the old spreadsheet for new limits each year. Since my salary also adjusts at the calendar year I adjust all my contributions before the first paycheck of new year which happens in mid-Janaury and set it on auto pilot for the year.
Filetmerlot
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Re: Lost out on 401k match for over-contributing

Post by Filetmerlot »

I guess I feel lucky that ours lets us choose to the penny how much we want to contribute. I do $19,000/27 (26 paychecks + end of year bonus) so I contribute 703.70 per pay period. That gets the full match. That means I'll come up about .10 short of maxing it out. That could result in 10's of pennies being lost after 30 years of compounding. I better fix it.

DW has to do whole percentages, but her match is given annually a couple months into the new year, so the biweekly amount is irrelevant.
JGoneRiding
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Re: Lost out on 401k match for over-contributing

Post by JGoneRiding »

I have a simple IRA so I have stopped trying to max it for the year and once I can afford to do so will max it after years end so that I get full bonus match. My work literally calculates bonus between dec 26th and dec 31st!
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batpot
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Re: Lost out on 401k match for over-contributing

Post by batpot »

That's a real bummer.
Does your employer give you the option to to post-tax contributions? That should allow you to continue getting their matching.
Then you can mega-backdoor that to a Roth.

Guess I'm lucky that my employer automatically converts the pretax to post tax, and continues their contribution.
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Darth Xanadu
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Re: Lost out on 401k match for over-contributing

Post by Darth Xanadu »

jhfenton wrote: Mon May 06, 2019 7:51 am
ctuser1 wrote: Mon May 06, 2019 7:28 am Looks like I am allowed to specify a percentage of total salary for me 401k, with only one decimal point in the percent.

i.e. 8.5% is good. 8.55% is not! You have to chose either 8.5 or 8.6 in the later case.

My plan is to adjust twice - once in March to make sure I don't go over too soon, and again in Nov to make sure I *do* contribute to the max while having at least 5% contributed till that very last paycheck on Dec 31.
I wish I could go out to tenths of a percent. I'm limited to whole percentages, so I divide the annual limit ($19,000) by my salary and round up to start the year. At some point in the year, I will have to drop it by 1%. How soon depends on how much I rounded up. I double-check my progress as I enter the 4th quarter. (Neither my wife nor I have a true-up match either.)
This just seems silly to have to jump through these hoops. I wonder if there is a specific reason why more employers don't have the true-up match approach. I can't imagine the administration is *that* much more difficult. I can't imagine the expense is very different (maybe it's an accounting issue? Or maybe it's a stealth cost-saving measure?).

I've been fortunate to never be in the position to have to do these silly (but important!) calculations / adjustments throughout the year.
saagar_is_cool
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Re: Lost out on 401k match for over-contributing

Post by saagar_is_cool »

ctuser1 wrote: Sat May 04, 2019 7:51 am It seems like they do not!!

I ran the numbers. The employer contribution is exactly 20something% short of 5%*base_salary for the year 2018!! I got the match for all months up to Sept + for the bonus paycheck. Bonus check hits at the beginning of the year - and it is still a bit of a mystery for me still how they calculate the match amount for that.

The last variable I am trying to figure out is how quickly do the contribution rate change take effect. I just did it yesterday, and need to see if it changes for the 5/15 paycheck. Depending on which paycheck it starts - I may need to adjust again!!

Going forward, my plan is to just let the match happen as is till the bonus check his in Feb. At that point, I will check exactly how much of the 19k limit have I eaten up - and adjust withholding based on that!!

All these are so needlessly complicated and 'gotcha' ridden!! :oops:
True up contributions happen the following year, typically by March or April. Check for an extra contribution in your transaction history. It wont be in your paycheck. It is an adjustment amount posted in your 401k account.
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jhfenton
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Re: Lost out on 401k match for over-contributing

Post by jhfenton »

Darth Xanadu wrote: Mon May 06, 2019 3:14 pm
jhfenton wrote: Mon May 06, 2019 7:51 am I wish I could go out to tenths of a percent. I'm limited to whole percentages, so I divide the annual limit ($19,000) by my salary and round up to start the year. At some point in the year, I will have to drop it by 1%. How soon depends on how much I rounded up. I double-check my progress as I enter the 4th quarter. (Neither my wife nor I have a true-up match either.)
This just seems silly to have to jump through these hoops. I wonder if there is a specific reason why more employers don't have the true-up match approach. I can't imagine the administration is *that* much more difficult. I can't imagine the expense is very different (maybe it's an accounting issue? Or maybe it's a stealth cost-saving measure?).

I've been fortunate to never be in the position to have to do these silly (but important!) calculations / adjustments throughout the year.
I agree, but I imagine it's largely a product of the employee base. It's just not relevant for most employees in the company.

In 25+ years of work, neither my wife nor I have ever had a 401(k) plan that did true-up matches or allowed non-Roth after-tax deferrals. That is not at all unusual, even though you would never know it reading Boglehead discussions on the topic. In a LCOL midwestern city, where $100K is a lot of money and $200K buys you a nice house, there aren't many folks maxing out their 401(k)s.

It was revealing three Decembers ago when my company unexpectedly paid out a large chunk of our Q4 bonus--usually paid out in February--on the third Friday in December. I had a hard time getting HR to understand why it was problematic to do that without letting us know so that we could adjust our 401(k) deferrals to avoid maxing out before our final paycheck.

(For reference, I work for a more-than-century-old S&P 600 company with ~4,300 employees.)
lazydavid
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Re: Lost out on 401k match for over-contributing

Post by lazydavid »

I think this is how most plans work. It's certainly in line with mine. I maintain a spreadsheet where I project out the full year to make sure I go slightly over (we're capped automatically) with my final paycheck. At the beginning of the year, I put in a conservative estimate for merit increase and bonus at the appropriate times, and try to set the withholdings to be as even as possible. If my increase/bonus assumptions turn out to be wrong, I adjust for the back half of the year so that I still hit the target.
monkeydluffy
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Re: Lost out on 401k match for over-contributing

Post by monkeydluffy »

Darth Xanadu wrote: Mon May 06, 2019 3:14 pm This just seems silly to have to jump through these hoops. I wonder if there is a specific reason why more employers don't have the true-up match approach. I can't imagine the administration is *that* much more difficult. I can't imagine the expense is very different (maybe it's an accounting issue? Or maybe it's a stealth cost-saving measure?).

I've been fortunate to never be in the position to have to do these silly (but important!) calculations / adjustments throughout the year.
Yeah, it would be so much easier if there was no matching whatsoever! $760 over 25 paychecks is all you really need! /s

On a more serious note, I wish my employer does matching on my 457. You guys got it lucky!
trevorshhh
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Re: Lost out on 401k match for over-contributing

Post by trevorshhh »

My paycheck varies quite a bit month-to-month (based on company performance) and I can only set a percentage (an integer, per paycheck) that takes a couple of months to update. I have to under-estimate and hope I don't miss out, but we're doing far better than expected so my paycheck has been much higher. A good problem to have, but still, I don't want to miss any match!
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neous
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Re: Lost out on 401k match for over-contributing

Post by neous »

My company does a true up and they offer access to a Roth 401k but no after-tax contribution for that mega back door, but that's not the case for my wife :( .
So in the spirit of knowing one's plan, I wanted to add that it also helps to know when HR submits changes to your 401k administrator
in my case I get paid on the 9th and the 24th so I have to make changes before the 15th and the 30th to reflect my contribution.
rkhusky
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Re: Lost out on 401k match for over-contributing

Post by rkhusky »

I missed out on some 401k match one year when we had 27 bi-weekly paychecks instead of the usual 26.
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jhfenton
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Re: Lost out on 401k match for over-contributing

Post by jhfenton »

trevorshhh wrote: Tue May 07, 2019 10:05 am My paycheck varies quite a bit month-to-month (based on company performance) and I can only set a percentage (an integer, per paycheck) that takes a couple of months to update. I have to under-estimate and hope I don't miss out, but we're doing far better than expected so my paycheck has been much higher. A good problem to have, but still, I don't want to miss any match!
A couple of months to update would be frustrating. I can update on Monday or Tuesday and have it reflected in the Wednesday payroll run for that Friday's paycheck. I had to do that in December 2017 when they announced a special year-end post-tax-cut 3% bonus. I had to cut my contribution in half at the last minute to make sure that I had room under the limit for a deferral from both my normal final paycheck and the 3% bonus. (At least in 2017, they gave us barely enough notice to make changes. In 2016, we didn't get any notice at all.)
alamo
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Re: Lost out on 401k match for over-contributing

Post by alamo »

ctuser1 wrote: Sat May 04, 2019 7:27 am I over-contribute to my 401k. Have been doing so for about a decade now!! This means I am done with my 401k contribution limit (18.5k last year, 19k this year) by sometime around September, and then I get big, fat paychecks for last 3 months of the year.

I got down to doing some actual spreadsheet calculations a few days ago. And then I figured out how stupid I was!!

My employer matches 5%. I am fully vested at this point! The calculation, however, is a little weird.

Monthly maximum match = base salary / 24 (bimonthly paycheck).

This means no contribution for Oct/Nov/Dec -> no match for these three months, or the last 25% of my salary.

I have been losing out on 25% of my employer match for years now!!! This is worth tens of thousands compounded over last ten years!!

Of course I promptly adjusted my withholdings to take care of this.

Am I completely SOL for the matches I have missed for the past years, or is there a way to recover the match for the past years?
I must be missing something. Why wouldnt you lower your contribution percentage to hit the contribution limit with your late December paychecks? Annually I adjust my 401k contribution percentage to make sure over 26 paychecks I hit the limit as late as possible.
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ctuser1
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Re: Lost out on 401k match for over-contributing

Post by ctuser1 »

alamo wrote: Tue May 07, 2019 2:13 pm I must be missing something. Why wouldnt you lower your contribution percentage to hit the contribution limit with your late December paychecks? Annually I adjust my 401k contribution percentage to make sure over 26 paychecks I hit the limit as late as possible.
It is obvious only in hindsight.

I did not know this could be the case. When I first found this out last week, I thought my calculations must be off. Then, on closer inspection I found out that I indeed lost out for over-contributing.

At this point, I have to adjust the percentage at least two times in the year to make sure I get my full 5% match:
1. At the beginning of the year. Start out with something lower than "average".
2. Re-adjust in March to make sure I don't go over the limit before Dec 31 paycheck. Since I am only allowed up to 10th of a percent precision - round down in the calculation.

I know this now and will do this going forward. I wish someone told me about it when I started maxing it out a decade ago. :x
bada bing
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Re: Lost out on 401k match for over-contributing

Post by bada bing »

MathIsMyWayr wrote: Sun May 05, 2019 4:13 pm Once you hit the IRS total annual limit ($56k in 2019), do all the contributions (employee contribution and employer match) stop for the rest of the year automatically? Or does it depend on the plan?
It depends on the plan. Last year I accidentally discovered a feature of my mega-corp employer's
plan that even the HR reps didn't know about. I exceeded the IRS total annual limit on the second to
last check of the year. HR assured me that I had lost the match for the last check because there was
no legal way for it to go into the account. That is not what happens though. In my employer's plan
(Fidelity is the custodian), any match beyond the IRS limit is deposited into a new account of a type
"non-qualified deferred compensation plan". The money is in a separate account on my Fidelity log-in
and has investment options identical to my 401K account. The money will be held until 14 months after
I end employment with my mega-corp and be distributed to me at that time in a lump sum. It will be
taxable to me at that time.

For the last 5 years I have been doing mega-backdoor Roth's and been careful to get close to, but not
exceed the IRS maximum annual limit. I won't do that any more. I set this year's deferral at 30%, which
will hit the annual limit in Oct. The remainder of the year the match will go into my new deferred
compensation account. I wish I had known about it earlier.

Moral of the story - the CSR of your custodian is probably the best source of info about your plan. Or
at least in the case of my employer's plan at Fidelity that is true.
michaeljc70
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Re: Lost out on 401k match for over-contributing

Post by michaeljc70 »

fizxman wrote: Mon May 06, 2019 7:10 am Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary? It would be so much easier if I could say I want to max out my 401k so take $19,000 / 26 paychecks, then contribute that amount. This should also avoid maxing out your 401k too early and thus losing out on the company match. I can do this with my Roth IRA but I can't (at least I don't know how to) with my 401k. Instead, I have to choose a whole number for my percentage, which may change part way through the first quarter when raises go through.
Can't you change it online? I was able to change my % contribution whenever I wanted to online. Does the raise really affect it that much?
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obafgkm
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Re: Lost out on 401k match for over-contributing

Post by obafgkm »

fizxman wrote: Mon May 06, 2019 7:10 am Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary?
michaeljc70 wrote: Tue May 07, 2019 5:55 pm Can't you change it online? I was able to change my % contribution whenever I wanted to online. Does the raise really affect it that much?
I guess I should be happy with my employer (a college). It allows me to change my contributions to my 403(b) at any time, and even set to change in the future (i.e., if I want to change my contribution to be $1439 for the paycheck of August 15, I could do it now online). And it is a dollar amount, not a percentage, so I can contribute precisely the amount I want to each pay period. Seeing exactly "$24,500" contributed to the 403(b) in box 12 of my 2018 W-2 was gratifying.

It seems, from reading threads like this, that being able to request a dollar amount for each pay period is not the norm. If the maximum amount is by law in a dollar amount (and not a percentage of salary), it seems that it would make more sense to allow workers to contribute a dollar amount (and not a percentage of salary).
michaeljc70
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Re: Lost out on 401k match for over-contributing

Post by michaeljc70 »

obafgkm wrote: Tue May 07, 2019 7:40 pm
fizxman wrote: Mon May 06, 2019 7:10 am Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary?
michaeljc70 wrote: Tue May 07, 2019 5:55 pm Can't you change it online? I was able to change my % contribution whenever I wanted to online. Does the raise really affect it that much?
I guess I should be happy with my employer (a college). It allows me to change my contributions to my 403(b) at any time, and even set to change in the future (i.e., if I want to change my contribution to be $1439 for the paycheck of August 15, I could do it now online). And it is a dollar amount, not a percentage, so I can contribute precisely the amount I want to each pay period. Seeing exactly "$24,500" contributed to the 403(b) in box 12 of my 2018 W-2 was gratifying.

It seems, from reading threads like this, that being able to request a dollar amount for each pay period is not the norm. If the maximum amount is by law in a dollar amount (and not a percentage of salary), it seems that it would make more sense to allow workers to contribute a dollar amount (and not a percentage of salary).
In my view, this is much ado about nothing. Seriously, having to do a simple calculation once a year after a raise (if even needed) takes less time than posting a message on here. You can probably estimate your raise and do nothing.

Unless you are getting double digit raises, I highly doubt it really needs to be adjusted anyway. For example, if you make 100k and contribute 19% (to max out for 2019) and get a 5% raise April 1st, you will hit $19k (the 2019 limit) in the first paycheck in Dec without changing anything.
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fizxman
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Re: Lost out on 401k match for over-contributing

Post by fizxman »

michaeljc70 wrote: Tue May 07, 2019 7:53 pm
obafgkm wrote: Tue May 07, 2019 7:40 pm
fizxman wrote: Mon May 06, 2019 7:10 am Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary?
michaeljc70 wrote: Tue May 07, 2019 5:55 pm Can't you change it online? I was able to change my % contribution whenever I wanted to online. Does the raise really affect it that much?
I guess I should be happy with my employer (a college). It allows me to change my contributions to my 403(b) at any time, and even set to change in the future (i.e., if I want to change my contribution to be $1439 for the paycheck of August 15, I could do it now online). And it is a dollar amount, not a percentage, so I can contribute precisely the amount I want to each pay period. Seeing exactly "$24,500" contributed to the 403(b) in box 12 of my 2018 W-2 was gratifying.

It seems, from reading threads like this, that being able to request a dollar amount for each pay period is not the norm. If the maximum amount is by law in a dollar amount (and not a percentage of salary), it seems that it would make more sense to allow workers to contribute a dollar amount (and not a percentage of salary).
In my view, this is much ado about nothing. Seriously, having to do a simple calculation once a year after a raise (if even needed) takes less time than posting a message on here. You can probably estimate your raise and do nothing.

Unless you are getting double digit raises, I highly doubt it really needs to be adjusted anyway. For example, if you make 100k and contribute 19% (to max out for 2019) and get a 5% raise April 1st, you will hit $19k (the 2019 limit) in the first paycheck in Dec without changing anything.
Yes, I can change my contribution percentage at any time and no the raise doesn't affect it that much. This is just more of a pet peeve of mine and not an issue in the slightest. I just think it's silly that I have to choose a percentage instead of a dollar amount. I really don't think it would be that difficult for Fidelity, my 401k plan provider, to implement. Before my company was bought, my 401k plan provider was with Vanguard, and it was the same there. Again, no big deal, I was just curious if there was a reason.
michaeljc70
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Re: Lost out on 401k match for over-contributing

Post by michaeljc70 »

fizxman wrote: Wed May 08, 2019 7:17 am
michaeljc70 wrote: Tue May 07, 2019 7:53 pm
obafgkm wrote: Tue May 07, 2019 7:40 pm
fizxman wrote: Mon May 06, 2019 7:10 am Is there a reason why I can't pick the dollar amount I want to contribute to my 401k instead of a percentage of my salary?
michaeljc70 wrote: Tue May 07, 2019 5:55 pm Can't you change it online? I was able to change my % contribution whenever I wanted to online. Does the raise really affect it that much?
I guess I should be happy with my employer (a college). It allows me to change my contributions to my 403(b) at any time, and even set to change in the future (i.e., if I want to change my contribution to be $1439 for the paycheck of August 15, I could do it now online). And it is a dollar amount, not a percentage, so I can contribute precisely the amount I want to each pay period. Seeing exactly "$24,500" contributed to the 403(b) in box 12 of my 2018 W-2 was gratifying.

It seems, from reading threads like this, that being able to request a dollar amount for each pay period is not the norm. If the maximum amount is by law in a dollar amount (and not a percentage of salary), it seems that it would make more sense to allow workers to contribute a dollar amount (and not a percentage of salary).
In my view, this is much ado about nothing. Seriously, having to do a simple calculation once a year after a raise (if even needed) takes less time than posting a message on here. You can probably estimate your raise and do nothing.

Unless you are getting double digit raises, I highly doubt it really needs to be adjusted anyway. For example, if you make 100k and contribute 19% (to max out for 2019) and get a 5% raise April 1st, you will hit $19k (the 2019 limit) in the first paycheck in Dec without changing anything.
Yes, I can change my contribution percentage at any time and no the raise doesn't affect it that much. This is just more of a pet peeve of mine and not an issue in the slightest. I just think it's silly that I have to choose a percentage instead of a dollar amount. I really don't think it would be that difficult for Fidelity, my 401k plan provider, to implement. Before my company was bought, my 401k plan provider was with Vanguard, and it was the same there. Again, no big deal, I was just curious if there was a reason.
I think the reason is a dollar amount won't be increased as your salary goes up. It will also not result in an increased 401k contribution if you get a bonus. You'd probably have a lot of people setting it and never changing it and therefore their contributions would never go up with their salary.
lstone19
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Re: Lost out on 401k match for over-contributing

Post by lstone19 »

michaeljc70 wrote: Wed May 08, 2019 7:25 am I think the reason is a dollar amount won't be increased as your salary goes up. It will also not result in an increased 401k contribution if you get a bonus. You'd probably have a lot of people setting it and never changing it and therefore their contributions would never go up with their salary.
Ding! Getting people to contribute is a big problem. My company had a provision that your contribution rate automatically went up 1% a year until it reached something like 10% unless you opted out of it.
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obafgkm
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Location: Pennsylvania

Re: Lost out on 401k match for over-contributing

Post by obafgkm »

michaeljc70 wrote: Wed May 08, 2019 7:25 am I think the reason is a dollar amount won't be increased as your salary goes up. It will also not result in an increased 401k contribution if you get a bonus. You'd probably have a lot of people setting it and never changing it and therefore their contributions would never go up with their salary.
Fair enough. If one is not contributing the maximum, it probably is a good idea to request a percentage contribution.
MathIsMyWayr
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Re: Lost out on 401k match for over-contributing

Post by MathIsMyWayr »

bada bing wrote: Tue May 07, 2019 4:35 pm
MathIsMyWayr wrote: Sun May 05, 2019 4:13 pm Once you hit the IRS total annual limit ($56k in 2019), do all the contributions (employee contribution and employer match) stop for the rest of the year automatically? Or does it depend on the plan?
It depends on the plan. ...
In my employer's plan
(Fidelity is the custodian), any match beyond the IRS limit is deposited into a new account of a type
"non-qualified deferred compensation plan". The money is in a separate account on my Fidelity log-in
and has investment options identical to my 401K account. The money will be held until 14 months after
I end employment with my mega-corp and be distributed to me at that time in a lump sum. It will be
taxable to me at that time.
Interesting case. I think you come out ahead by filling your 401(k) space with after-tax 401(k) before employer matching was maxed. In a sense, they gave an extra limited-term non-governmental 457(b) with the employer match over the IRS limit per employer.
tesuzuki2002
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Re: Lost out on 401k match for over-contributing

Post by tesuzuki2002 »

ctuser1 wrote: Sat May 04, 2019 7:27 am I over-contribute to my 401k. Have been doing so for about a decade now!! This means I am done with my 401k contribution limit (18.5k last year, 19k this year) by sometime around September, and then I get big, fat paychecks for last 3 months of the year.

I got down to doing some actual spreadsheet calculations a few days ago. And then I figured out how stupid I was!!

My employer matches 5%. I am fully vested at this point! The calculation, however, is a little weird.

Monthly maximum match = base salary / 24 (bimonthly paycheck).

This means no contribution for Oct/Nov/Dec -> no match for these three months, or the last 25% of my salary.

I have been losing out on 25% of my employer match for years now!!! This is worth tens of thousands compounded over last ten years!!

Of course I promptly adjusted my withholdings to take care of this.

Am I completely SOL for the matches I have missed for the past years, or is there a way to recover the match for the past years?

My employer does the same with bonuses and such...and I know their trick so I just make sure everything that goes in through the year has at least the match amount of 6% so I can get all the matching funds. Otherwise they segment it by each check and if there is no employee contribution that segment you lose out.

Be happy you identified this so you can make corrections going forward. Losing out on the 5% for those few months isn't a huge deal... but now you can get that extra bonus going forward.

I'd say SOL. You can ask HR... it's really up to them if they want to settle it up.
michaeljc70
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Re: Lost out on 401k match for over-contributing

Post by michaeljc70 »

Don't people check this stuff? 10 years? It is a simple calculation. If they match up to 5% of salary and you max out contribution and make $100k 100000*.05=5000 is employer match. If you didn't get 5k, there is an issue (like monthly matching and you need to adjust). I look at everything whether it comes from my employer, a bank, brokerage or whatever. My father was paranoid about being cheated on everything and some of that was passed on :shock: .
spinj
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Re: Lost out on 401k match for over-contributing

Post by spinj »

michaeljc70 wrote: Wed May 08, 2019 8:04 pm Don't people check this stuff? 10 years?
It’s often not clear and with mergers/plan changes it can change every year. For example my company matches and gifts but has the max match. Fortunately they have a true up in April, which is also when the gift is. There’s different vesting periods and odd codes for the transactions and often the information isn’t on statements but only upon request.
Topic Author
ctuser1
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Re: Lost out on 401k match for over-contributing

Post by ctuser1 »

ctuser1 wrote: Sat May 04, 2019 7:51 am The last variable I am trying to figure out is how quickly do the contribution rate change take effect. I just did it yesterday, and need to see if it changes for the 5/15 paycheck. Depending on which paycheck it starts - I may need to adjust again!!
Following up for the curious.

Paystub for the 5/15 check just showed up online.

The adjustments have not taken effect in this paycheck!! :x

I hope next one takes the adjustment in.
Topic Author
ctuser1
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Re: Lost out on 401k match for over-contributing

Post by ctuser1 »

Update + a question for experts.

Our payslips show up a few days early. 5/31 paystub showed up today, and my percentage-elections change is finally reflected in it.

Thankfully, even if I make no further adjustments, the contribution on 12/31 paystub (i.e. the amount left to reach 2019 limit of $19000) would still be enough to cover the 5% match amount. Barely!
Yay!! I will hopefully no longer miss my full match. Better late than never!


Question for the experts ---
What are the rules regarding which contribution is considered to be a part of Calendar Year 2019? The 401k contributions typically show up with a few days of delay. Given this, the Dec 31 contribution would likely show up in the first week of Jan 2020.
Will this be considered a part of the 2019 contributions? Or 2020?
My spreadsheet currently assumes that the contribution from the Dec 31 paystub would count towards the 2019 contribution limit.

Is it up to the 401k provider? Some accounting details of how our pay accrue? Or are there actual laws on the books regarding this?
dthanson42
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Re: Lost out on 401k match for over-contributing

Post by dthanson42 »

To piggy back on this thread, if you are 100% commission at your job, and your employer matches up to 4% of deferrals and you are 100% vested right away, should I be thinking about spreading out 401k contributions over the course of the entire year vs. having it be maxed out sooner if having a good year compensation wise.

When setting up 401k I asked if there was a benefit to maxing out 401k earlier in year or spreading out over entire year and I was told no. After reading this thread I am now wondering if I am leaving money on the table with regards to match.

Here is how the plan reads: company will match 100% of deferrals up to 3% of compensation, and then 50% if an employee contributed greater than 5%. This ends up being 4%. Annual maximum of $19000.

Any advice?
dthanson42
Posts: 20
Joined: Tue Feb 17, 2015 6:12 pm

Re: Lost out on 401k match for over-contributing

Post by dthanson42 »

To piggy back on this thread, if you are 100% commission at your job, and your employer matches up to 4% of deferrals and you are 100% vested right away, should I be thinking about spreading out 401k contributions over the course of the entire year vs. having it be maxed out sooner if having a good year compensation wise.

When setting up 401k I asked if there was a benefit to maxing out 401k earlier in year or spreading out over entire year and I was told no. After reading this thread I am now wondering if I am leaving money on the table with regards to match.

Here is how the plan reads: company will match 100% of deferrals up to 3% of compensation, and then 50% if an employee contributed greater than 5%. This ends up being 4%. Annual maximum of $19000.

Any advice?
Topic Author
ctuser1
Posts: 79
Joined: Sun Jan 13, 2019 7:42 pm

Re: Lost out on 401k match for over-contributing

Post by ctuser1 »

dthanson42 wrote: Mon May 27, 2019 9:41 pm To piggy back on this thread, if you are 100% commission at your job, and your employer matches up to 4% of deferrals and you are 100% vested right away, should I be thinking about spreading out 401k contributions over the course of the entire year vs. having it be maxed out sooner if having a good year compensation wise.

When setting up 401k I asked if there was a benefit to maxing out 401k earlier in year or spreading out over entire year and I was told no. After reading this thread I am now wondering if I am leaving money on the table with regards to match.

Here is how the plan reads: company will match 100% of deferrals up to 3% of compensation, and then 50% if an employee contributed greater than 5%. This ends up being 4%. Annual maximum of $19000.

Any advice?
Step 1 : Figure out if you are leaving money on the table.
A. Get all "Activity" for your account from Calendar year 2018. (Any other year will also do).
B. Add up all employer matches.
C. Check if sum of employer matches in #B is equal to 4% of your total salary.

If you find it is equal in #C, you are golden.
If not, check if your plan has true up. In this case, there will be a contribution in April or May of 2019 (for calendar year 2018 true up) to bring you up to 4%. Check to see if there are unexplained, extra match contribution to your 401k account.
If there is true up, you are golden. No need to worry even if you max out the $19k limits within the first 2 months.

Step 2 : If there is a problem, just spread things out.
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