Can Employer Set 401k Contribution Limit Below IRS Limit?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sat Apr 28, 2018 10:21 pm

Hi everyone,

I've been digging into my company's 401k plan policy today since this is going to be my first full year with the company (and also of my career). Initially, I was trying to read up and see if I could do a mega backdoor Roth, but I stumbled across something that currently has me bummed out. To quote from the policy:

"...When you enroll in the Plan, you decide how much you want to save - from 1% to 25% (in whole percentages) of your 'Basic Pay.'"

This is news to me. Currently I make $60k a year, and have been contributing 30% of my paycheck so far this year in order to max out my 401k at the IRS limit of $18.5k. Can a company actually do such a thing as this? I had no idea... I don't qualify for HCE status or anything either. I plan on talking to HR and having them point me in the right direction come Monday, but has anyone else ever had any experience like this? To be honest, it's got me pretty depressed. I guess I could start a taxable account, but that doesn't feel like much of a consolation prize.
27. Always learning.

Bacchus01
Posts: 2083
Joined: Mon Dec 24, 2012 9:35 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Bacchus01 » Sat Apr 28, 2018 10:24 pm

Yes, they can and they often do. It’s more rare now, but it used to be quite common.

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sat Apr 28, 2018 10:31 pm

Bacchus01 wrote:
Sat Apr 28, 2018 10:24 pm
Yes, they can and they often do. It’s more rare now, but it used to be quite common.
Dang, this sucks. Yeah I was googling around earlier and saw old posts about an old 15% limit imposed by the IRS it seemed. This will effectively prohibit me from contributing about $10,000 in Roth contributions that I was planning on doing...ughhhh. :oops:
27. Always learning.

sf2sv
Posts: 38
Joined: Sat Aug 19, 2017 10:27 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by sf2sv » Sat Apr 28, 2018 10:32 pm

What would be the benefit to a company for imposing such limits?

ThriftyPhD
Posts: 737
Joined: Mon Jul 31, 2017 10:43 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by ThriftyPhD » Sat Apr 28, 2018 10:38 pm

youngpleb wrote:
Sat Apr 28, 2018 10:21 pm
This is news to me. Currently I make $60k a year, and have been contributing 30% of my paycheck so far this year in order to max out my 401k at the IRS limit of $18.5k. Can a company actually do such a thing as this? I had no idea... I don't qualify for HCE status or anything either. I plan on talking to HR and having them point me in the right direction come Monday, but has anyone else ever had any experience like this? To be honest, it's got me pretty depressed. I guess I could start a taxable account, but that doesn't feel like much of a consolation prize.
Not exactly what you asked, but since you mention a taxable account, are you also funding an IRA? If not, that's another $5500 you can contribute.

Bacchus01
Posts: 2083
Joined: Mon Dec 24, 2012 9:35 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Bacchus01 » Sat Apr 28, 2018 10:39 pm

sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
Lower administrative costs

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sat Apr 28, 2018 10:46 pm

ThriftyPhD wrote:
Sat Apr 28, 2018 10:38 pm

Not exactly what you asked, but since you mention a taxable account, are you also funding an IRA? If not, that's another $5500 you can contribute.
I actually just finished maxing my Roth IRA this morning, which is why I was trying to read up and see if I could do a mega backdoor Roth over the rest of the year when I stumbled upon the 25% cap. :(
27. Always learning.

User avatar
Dale_G
Posts: 3124
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 81

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Dale_G » Sat Apr 28, 2018 11:39 pm

Don't feel too bummed out youngpleb. At my last job as an HCE I was limited to about 1-1/2% of pay - because of a low contribution rate of non-HCEs.

When education and propaganda visits from the 401k provider didn't do much to increase participation, one HCE threatened to put non-contributors on a weekly parking lot sweeping detail. I won't comment on the legality or morality of this, but 100% of his troops signed up, while mine still languished :annoyed

At 25% of pay, you are doing very well - keep up the good work.

Dale
Volatility is my friend

Darth Xanadu
Posts: 498
Joined: Sat Jan 27, 2018 1:47 am
Location: Middle Earth

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Darth Xanadu » Sat Apr 28, 2018 11:41 pm

Bacchus01 wrote:
Sat Apr 28, 2018 10:39 pm
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
Lower administrative costs
In what way would this lower administrative costs?
"A courageous teacher, failure is."

TIAX
Posts: 1180
Joined: Sat Jan 11, 2014 12:19 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by TIAX » Sun Apr 29, 2018 12:42 am

Darth Xanadu wrote:
Sat Apr 28, 2018 11:41 pm
Bacchus01 wrote:
Sat Apr 28, 2018 10:39 pm
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
Lower administrative costs
In what way would this lower administrative costs?
The company may be paying fees based on assets.

Bacchus01
Posts: 2083
Joined: Mon Dec 24, 2012 9:35 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Bacchus01 » Sun Apr 29, 2018 5:13 am

Darth Xanadu wrote:
Sat Apr 28, 2018 11:41 pm
Bacchus01 wrote:
Sat Apr 28, 2018 10:39 pm
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
Lower administrative costs
In what way would this lower administrative costs?
Less assets under management

DarkHelmetII
Posts: 166
Joined: Mon Jul 24, 2017 12:25 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by DarkHelmetII » Sun Apr 29, 2018 5:33 am

Dale_G wrote:
Sat Apr 28, 2018 11:39 pm
At my last job as an HCE I was limited to about 1-1/2% of pay - because of a low contribution rate of non-HCEs.
Fundamental driver in this case is IRS, however, not so much the employer, correct?

User avatar
samsoes
Posts: 897
Joined: Tue Mar 05, 2013 9:12 am
Location: Northeast Rat Race

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by samsoes » Sun Apr 29, 2018 6:19 am

youngpleb wrote:
Sat Apr 28, 2018 10:21 pm

"...When you enroll in the Plan, you decide how much you want to save - from 1% to 25% (in whole percentages) of your 'Basic Pay.'"

This is news to me. Currently I make $60k a year, and have been contributing 30% of my paycheck...
Seems like you are exceeding the published limit already. Shhhhh....!
"Happiness Is Not My Companion" - Gen. Gouverneur K. Warren. | (Avatar is the statue of Gen. Warren atop Little Round Top @ Gettysburg National Military Park.)

bberris
Posts: 1089
Joined: Sun Feb 20, 2011 9:44 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by bberris » Sun Apr 29, 2018 6:29 am

sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
If the benefit of 401k participation is overly tilted to highly compensate employees they could be forced to take back contributions. This is by IRS regulation. So your company has decided to limit the size of contributions to avoid this problem.

A better way is to educate employees and give a generous match to entice young, lesser-paid, employees to save.

mrc
Posts: 1239
Joined: Sun Jan 10, 2016 6:39 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by mrc » Sun Apr 29, 2018 6:30 am

youngpleb wrote:
Sat Apr 28, 2018 10:21 pm
Currently I make $60k a year, and have been contributing 30% of my paycheck so far this year in order to max out my 401k at the IRS limit of $18.5k. Can a company actually do such a thing as this? I had no idea...
Did work the math on your contribution amount? Perhaps you set your deduction to 30%, but payroll deducts only 25%?
If it’s not long term it’s small talk

Dottie57
Posts: 4808
Joined: Thu May 19, 2016 5:43 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Dottie57 » Sun Apr 29, 2018 6:39 am

youngpleb wrote:
Sat Apr 28, 2018 10:31 pm
Bacchus01 wrote:
Sat Apr 28, 2018 10:24 pm
Yes, they can and they often do. It’s more rare now, but it used to be quite common.
Dang, this sucks. Yeah I was googling around earlier and saw old posts about an old 15% limit imposed by the IRS it seemed. This will effectively prohibit me from contributing about $10,000 in Roth contributions that I was planning on doing...ughhhh. :oops:
Thanks for this. I remember the 15% limit. It did not really matter at the time since 15% was all I could afford. Wish I had realized when it changed.

User avatar
HueyLD
Posts: 6351
Joined: Mon Jan 14, 2008 10:30 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by HueyLD » Sun Apr 29, 2018 7:00 am

bberris wrote:
Sun Apr 29, 2018 6:29 am
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
If the benefit of 401k participation is overly tilted to highly compensate employees they could be forced to take back contributions. This is by IRS regulation. So your company has decided to limit the size of contributions to avoid this problem.

A better way is to educate employees and give a generous match to entice young, lesser-paid, employees to save.
+1.

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sun Apr 29, 2018 7:46 am

mrc wrote:
Sun Apr 29, 2018 6:30 am

Did work the math on your contribution amount? Perhaps you set your deduction to 30%, but payroll deducts only 25%?
Yes, it definitely takes 30% out. I think the 25% limit is for my total annual salary though, so I wouldn’t have hit that number yet. Maybe it will just stop taking out anything from my paychecks once I do (which would be around the end of October).
27. Always learning.

User avatar
Svensk Anga
Posts: 444
Joined: Sun Dec 23, 2012 5:16 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Svensk Anga » Sun Apr 29, 2018 7:52 am

Check to see if you have to contribute every paycheck to get the match, or if the company does an annual "true-up". If there is a true-up, it may not hit your account until March or so. Better to work it so you are contributing at least the match percentage every check.

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sun Apr 29, 2018 7:54 am

bberris wrote:
Sun Apr 29, 2018 6:29 am
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
If the benefit of 401k participation is overly tilted to highly compensate employees they could be forced to take back contributions. This is by IRS regulation. So your company has decided to limit the size of contributions to avoid this problem.

A better way is to educate employees and give a generous match to entice young, lesser-paid, employees to save.
That’s the strange part, because there is another section in the plan description that talks about HCEs and how they might not be able to fully contribute, and it brings up that high limit ($53,000ish?) that all total contributions can’t exceed.

How would 401k contribution participation become “tilted” to HCEs though? That’s what I don’t understand. Sure, they can contribute more money, but there are still the 2 limits set by the IRS so why would a company impose a percentage of salary cap at all? Just seems weird. And to be fair, my company gives a 6% match so that’s not bad.
27. Always learning.

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sun Apr 29, 2018 7:56 am

Svensk Anga wrote:
Sun Apr 29, 2018 7:52 am
Check to see if you have to contribute every paycheck to get the match, or if the company does an annual "true-up". If there is a true-up, it may not hit your account until March or so. Better to work it so you are contributing at least the match percentage every check.
Yeah, it has to be every paycheck. I started working there last September and contributed more than enough to get the total match, but there was no true-up later on. If the percentage cap is definitely unavoidable I’ll be adjusting my contributions to take full advantage of the matching.
27. Always learning.

Spirit Rider
Posts: 9174
Joined: Fri Mar 02, 2007 2:39 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Spirit Rider » Sun Apr 29, 2018 11:36 am

bberris wrote:
Sun Apr 29, 2018 6:29 am
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
If the benefit of 401k participation is overly tilted to highly compensate employees they could be forced to take back contributions. This is by IRS regulation. So your company has decided to limit the size of contributions to avoid this problem.
This would have the exact opposite effect. The 2018 HCE threshold is $120K. The maximum % any HCE could contribute is $18.5K / $120K ~= 15.4%

A 25% limit can only limit non-HCEs. Thereby, reducing the non-HCE average ADP.

sf2sv
Posts: 38
Joined: Sat Aug 19, 2017 10:27 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by sf2sv » Sun Apr 29, 2018 11:38 am

Bacchus01 wrote:
Sun Apr 29, 2018 5:13 am
Darth Xanadu wrote:
Sat Apr 28, 2018 11:41 pm
Bacchus01 wrote:
Sat Apr 28, 2018 10:39 pm
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
Lower administrative costs
In what way would this lower administrative costs?
Less assets under management
Got it, man that’s a real bummer

Spirit Rider
Posts: 9174
Joined: Fri Mar 02, 2007 2:39 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Spirit Rider » Sun Apr 29, 2018 11:43 am

youngpleb wrote:
Sat Apr 28, 2018 10:21 pm
To quote from the policy:

"...When you enroll in the Plan, you decide how much you want to save - from 1% to 25% (in whole percentages) of your 'Basic Pay.'"

This is news to me. Currently I make $60k a year, and have been contributing 30% of my paycheck so far this year in order to max out my 401k at the IRS limit of $18.5k.
Where was this stated? Given that you are in fact contributing 30%. It is entirely possible that the actual plan document was been amended during a mandatory restatement and this was never updated in other documents. However, I wouldn't raise the issue.

User avatar
Earl Lemongrab
Posts: 5847
Joined: Tue Jun 10, 2014 1:14 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Earl Lemongrab » Sun Apr 29, 2018 12:25 pm

Megacorp had a percentage limit. Over the years that I was paying attention (from about 2006), it started at 20%, went to 25% at some point, and was 30% for the past few years. One explanation that I received was that it helped to reduce the amount of after-tax contributions in the plan, which affects testing. I don't know if that was accurate. It did affect how much after-tax I could put in. I would have gone for the 415(c) limit if possible.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Sun Apr 29, 2018 1:33 pm

Spirit Rider wrote:
Sun Apr 29, 2018 11:43 am
youngpleb wrote:
Sat Apr 28, 2018 10:21 pm
To quote from the policy:

"...When you enroll in the Plan, you decide how much you want to save - from 1% to 25% (in whole percentages) of your 'Basic Pay.'"

This is news to me. Currently I make $60k a year, and have been contributing 30% of my paycheck so far this year in order to max out my 401k at the IRS limit of $18.5k.
Where was this stated? Given that you are in fact contributing 30%. It is entirely possible that the actual plan document was been amended during a mandatory restatement and this was never updated in other documents. However, I wouldn't raise the issue.
I got it from my employer's 40+ page 401k Plan Description, straight from their website. Looks like it was last updated in 2016 (i.e. still shows $18,000 as the pre-tax/Roth limit). I agree that it is weird I'm able to even put in 30%, which currently puts me at just over $6k for the year. I'm wondering though if when I hit the $15k mark (25% for me) if contributions will just stop being taken out of my paycheck, which would suck because then I'd miss out on a few hundred bucks of company matching. :shock:

Going to try to find out some more information at work tomorrow.
27. Always learning.

quantAndHold
Posts: 2072
Joined: Thu Sep 17, 2015 10:39 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by quantAndHold » Sun Apr 29, 2018 4:53 pm

DarkHelmetII wrote:
Sun Apr 29, 2018 5:33 am
Dale_G wrote:
Sat Apr 28, 2018 11:39 pm
At my last job as an HCE I was limited to about 1-1/2% of pay - because of a low contribution rate of non-HCEs.
Fundamental driver in this case is IRS, however, not so much the employer, correct?
If enough non-HCE employees are contributing, or it’s a safe harbor plan, then the HCE’s don’t have the arbitrary limits. The company has control over both.

DarkHelmetII
Posts: 166
Joined: Mon Jul 24, 2017 12:25 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by DarkHelmetII » Mon Apr 30, 2018 7:24 am

quantAndHold wrote:
Sun Apr 29, 2018 4:53 pm
DarkHelmetII wrote:
Sun Apr 29, 2018 5:33 am
Dale_G wrote:
Sat Apr 28, 2018 11:39 pm
At my last job as an HCE I was limited to about 1-1/2% of pay - because of a low contribution rate of non-HCEs.
Fundamental driver in this case is IRS, however, not so much the employer, correct?
If enough non-HCE employees are contributing, or it’s a safe harbor plan, then the HCE’s don’t have the arbitrary limits. The company has control over both.
Thanks for correcting me on this. For my own education (no longer currently with the employer that had this issue), what does is take to be a safe harbor plan? I was seriously disappointed with my previous employer on this issue and was one reason I took a new job elsewhere. At my previous employer, I could only put in ~$5,000 into 401k. Rest (e.g. up to 401k limit in order to get the match) had to be put into a really high expense variable annuity or VUL which we are all of course aware of the downfalls on those.

Curious to know how much being a safe harbor plan is within employer's control or outside of employer's control.

TIAX
Posts: 1180
Joined: Sat Jan 11, 2014 12:19 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by TIAX » Mon Apr 30, 2018 8:06 am

DarkHelmetII wrote:
Mon Apr 30, 2018 7:24 am
Thanks for correcting me on this. For my own education (no longer currently with the employer that had this issue), what does is take to be a safe harbor plan? I was seriously disappointed with my previous employer on this issue and was one reason I took a new job elsewhere. At my previous employer, I could only put in ~$5,000 into 401k. Rest (e.g. up to 401k limit in order to get the match) had to be put into a really high expense variable annuity or VUL which we are all of course aware of the downfalls on those.

Curious to know how much being a safe harbor plan is within employer's control or outside of employer's control.
It's within the employer's control; the employer would just need to let the 401(k) administrator know. The employer must either (1) make a 3% contribution to each employee's 401(k) irrespective of their contributions; or (2) contribute 100% of the first 3% of each employee's contributions and 50% of the next 2% of each employee's contributions (a maximum matching contribution of 4%). See this post at Employee Fiduciary.

bberris
Posts: 1089
Joined: Sun Feb 20, 2011 9:44 am

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by bberris » Mon Apr 30, 2018 8:20 am

Spirit Rider wrote:
Sun Apr 29, 2018 11:36 am
bberris wrote:
Sun Apr 29, 2018 6:29 am
sf2sv wrote:
Sat Apr 28, 2018 10:32 pm
What would be the benefit to a company for imposing such limits?
If the benefit of 401k participation is overly tilted to highly compensate employees they could be forced to take back contributions. This is by IRS regulation. So your company has decided to limit the size of contributions to avoid this problem.
This would have the exact opposite effect. The 2018 HCE threshold is $120K. The maximum % any HCE could contribute is $18.5K / $120K ~= 15.4%

A 25% limit can only limit non-HCEs. Thereby, reducing the non-HCE average ADP.
Yes, you're right. Pardon my brainfart. Maybe they should have put a dollar limit, or that was not the issue? My company had a 50 % limit per paycheck.

Spirit Rider
Posts: 9174
Joined: Fri Mar 02, 2007 2:39 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Spirit Rider » Mon Apr 30, 2018 12:50 pm

youngpleb wrote:
Sat Apr 28, 2018 10:21 pm
To quote from the policy:

"...When you enroll in the Plan, you decide how much you want to save - from 1% to 25% (in whole percentages) of your 'Basic Pay.'"
I have been trying to rack my brain for a compelling reason for this limit. I really don't buy the AUM argument. The only rational reason I can come up with is laziness and/or ineptitude.

Prior to 2002, the maximum total employer contributions including the total of all employee deferrals was 15% of the total of all employee compensation. Employers typically limited the deferrals of individuals to 15%. They did this so when employee deferrals were combined with employer matches and/or profit sharing, the average was below 15%.

The Economic Growth And Tax Relief Reconciliation Act of 2001 (EGTRRA) made two significant changes effective 1/1/2002:
  • The maximum employer contribution % was raised to 25%, including for the SEP IRA) .
  • That limit no longer included employee elective deferrals.
If I had to guess. I think when the employer restated the 401k plan for the EGTRRA, they took note of 1. above and did a search and replace from 15% to 25%. They either took no note of 2. above or probably thought an increase from 15% to 25% was more than enough. Then they have never revisited the maximum contribution % again. It could be as simple as inertia with no real reason.

P.S. 2. above is the reason for the explosion in one-participant 401k plans starting in 2002. One-participant 401k plans existed prior to 2002 but were of less value. Why would you bother when the maximum contribution was the same as a SEP IRA.

KSActuary
Posts: 379
Joined: Fri Jan 13, 2012 10:53 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by KSActuary » Mon Apr 30, 2018 1:03 pm

Don't buy the AUM argument either since the participants probably pay those costs.

Any type of industry issue, tradition or union/non-union issue?

Bacchus01
Posts: 2083
Joined: Mon Dec 24, 2012 9:35 pm

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by Bacchus01 » Mon Apr 30, 2018 6:35 pm

KSActuary wrote:
Mon Apr 30, 2018 1:03 pm
Don't buy the AUM argument either since the participants probably pay those costs.

Any type of industry issue, tradition or union/non-union issue?
In some cases this is true.

In many cases it is not.

youngpleb
Posts: 230
Joined: Mon Oct 16, 2017 7:06 pm
Location: VA, USA

Re: Can Employer Set 401k Contribution Limit Below IRS Limit?

Post by youngpleb » Mon Apr 30, 2018 6:43 pm

So after digging around for awhile at work today, I was able to find an old company announcement from mid-2017 (before my job began) stating that they were officially doing away with the 25% limit and now just allowing whatever the IRS limit is. :sharebeer

It looks like the plan policy PDF I pulled from the website just never got updated, as it is from 2016! Seeing the old announcement was enough to quell my fears, as it came from one of the division heads. So now I am officially free to max my 401k! :moneybag

I still have no idea why anyone would implement a percentage limit like that, especially for non-HCE employees (btw, my company defines HCE as basic salary greater than $120k). They can be old school on some stuff, so I wouldn't be surprised if it was just some leftover policy adjustment like Spirit Rider suggested. I'm glad they decided to leave it in the dust! This was bothering me so much the past few days. The thought of missing out on nearly $10k of Roth contributions just because of some company policy was pretty upsetting, especially since I'm just starting to really invest.
27. Always learning.

Post Reply