Jun
3
Peter W asked:
I have two questions about my employer retirement 401k contributions.
1. The maximum I can put in is $15,500 for 2007. But I started in mid year. Is it prorated from the time I started? Example: I started on July 1, is the contribution $15,500/2 = $7,750.
2. My employer matching is 2:1 up to a maximum of 6% of salary. Example: $50,000 annual salary, employer contribution is $3,000. For every dollar I put in, they will put in $0.50. Is the employer matching of $3,000 included in the $15,500 which means the employee total amount invested is $12,500, or, is it $15,500 from employee plus $3,000 from employer which would equal $18,500. I think it’s the former but just want to check.
Thanks….
Question posted courtesy of: James
I have two questions about my employer retirement 401k contributions.
1. The maximum I can put in is $15,500 for 2007. But I started in mid year. Is it prorated from the time I started? Example: I started on July 1, is the contribution $15,500/2 = $7,750.
2. My employer matching is 2:1 up to a maximum of 6% of salary. Example: $50,000 annual salary, employer contribution is $3,000. For every dollar I put in, they will put in $0.50. Is the employer matching of $3,000 included in the $15,500 which means the employee total amount invested is $12,500, or, is it $15,500 from employee plus $3,000 from employer which would equal $18,500. I think it’s the former but just want to check.
Thanks….
Question posted courtesy of: James
Comments
3 Responses to “Are contributions to 401k prorated from the time you start work?”
Leave a Reply
part1) No it is not prorated. The annual limit remains 15,500. The only restriction is how much can you aford to put in per week. Also, the plan needs to be a qualified’ plan. To do that your company must maintain a ratio of contributions between ‘highly compensated employees’ and all other employees. This MAY result in a maximum percentage that yur employer allows you to contribute each week, and that maximum percentage MAY prevent you from maxing out.
If you are over 50 you are allowed an additional separate 5000 ‘catch up’ contribution.
Part 2) No, the employer portion does not count toward your maximum. You can contribute 15,500 and your employer an additional amount.
401k lets say you were to contribute maximum of the middle of the middle of the middle of 15500 per calander year not this particular.
401k lets say you at all.
The 15k no and if you are over 50 you are over 50 you are over 50 you are over 50 you can add an additional 5k on top of.