## 401(k) Match Calculation

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Topic Author
swied
Posts: 20
Joined: Tue Aug 09, 2016 5:46 am

### 401(k) Match Calculation

The company I work for has in the past matched 401(k) contributions. Here is the match verbiage: 20% of the employees own deferral up to 5%.
I am trying to contribute just enough to max out the company match. For easy figuring, if I made \$100k, what should my my 401(k) percentage be?
fyre4ce
Posts: 1042
Joined: Sun Aug 06, 2017 11:29 am

### Re: 401(k) Match Calculation

I'd interpret that as lesser of {20% of elective deferral, 5% of base salary}. So if your base salary was \$100k, and you contributed the maximum deferral of \$19,500, you'd get a \$3,900 match (lesser of \$19500*20%=\$3,900, \$100000*5%=\$5,000). You can run the numbers and see that if you make more than \$78,000 base salary, your match won't be capped by the 5% base salary, but if you make less than \$78,000 it could be.
arcticpineapplecorp.
Posts: 6412
Joined: Tue Mar 06, 2012 9:22 pm

### Re: 401(k) Match Calculation

swied wrote: Mon Oct 12, 2020 7:18 pm The company I work for has in the past matched 401(k) contributions. Here is the match verbiage: 20% of the employees own deferral up to 5%.
I am trying to contribute just enough to max out the company match. For easy figuring, if I made \$100k, what should my my 401(k) percentage be?
max 401k (under 50) is \$19,500. Say you contribute that.

If they're giving you 20% of that match, up to 5% (presumably this is 5% of your salary...therefore they wouldn't contribute more than \$5000 if you make \$100k), then 20% of \$19,500 is a \$3900 employer match.

right? wrong?
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
Alaric
Posts: 72
Joined: Tue Feb 05, 2019 1:38 pm

### Re: 401(k) Match Calculation

\$5,000 (5%). They will 20% match you up to that point, so a \$1,000 employer match.
Topic Author
swied
Posts: 20
Joined: Tue Aug 09, 2016 5:46 am

### Re: 401(k) Match Calculation

Very confusing. Here is the official language for the past:
The company contribution is 20% of each eligible employee's own deferral, up to the first 5% of your compensation.
teen persuasion
Posts: 1320
Joined: Sun Oct 25, 2015 1:43 pm

### Re: 401(k) Match Calculation

swied wrote: Mon Oct 12, 2020 7:28 pm Very confusing. Here is the official language for the past:
The company contribution is 20% of each eligible employee's own deferral, up to the first 5% of your compensation.
That matches Alaric's post.

First 5% of your \$100k compensation is \$5k contribution. Twenty % of \$5k contribution is \$1k employer match.
fyre4ce
Posts: 1042
Joined: Sun Aug 06, 2017 11:29 am

### Re: 401(k) Match Calculation

I still favor my interpretation (\$3,900) rather than the alternate that several have proposed (\$1,000). But, the best way to resolve it is to contact your employer's benefits team and ask them.
shockwavesfan
Posts: 18
Joined: Tue Sep 15, 2020 10:44 am

### Re: 401(k) Match Calculation

I work with plan documents and summary plan descriptions all the time. I’m going with the posters who think the maximum match will be 1% of your pay so in the example \$1,000.

You will want to make sure but if that turns out to be true you will want to make sure that you contribute a minimum of 5% to maximize the company match.
MikeG62
Posts: 3228
Joined: Tue Nov 15, 2016 3:20 pm
Location: New Jersey

### Re: 401(k) Match Calculation

teen persuasion wrote: Mon Oct 12, 2020 7:31 pm
swied wrote: Mon Oct 12, 2020 7:28 pm Very confusing. Here is the official language for the past:
The company contribution is 20% of each eligible employee's own deferral, up to the first 5% of your compensation.
That matches Alaric's post.

First 5% of your \$100k compensation is \$5k contribution. Twenty % of \$5k contribution is \$1k employer match.
+1.

20% x 5% = 1%
1% x \$100,000 = \$1,000

This assumes you contribute at least 5% of your compensation (and that your compensation is \$100,000).
Real Knowledge Comes Only From Experience
Topic Author
swied
Posts: 20
Joined: Tue Aug 09, 2016 5:46 am

Thanks everyone.