Maximum Employer 401K Contributions
I’d like to clear up a very common 401K misconception surrounding maximum contribution limits.
Question: The individual IRS maximum 401K contribution limit is $19,500 for 2021 ($26,000 if you include the catch-up contribution for those age 50+). But what exactly does this mean? Does this mean that if my employer matches my contribution dollar-for-dollar that I can only contribute half of the maximum?
Answer: No. The IRS maximum 401K contribution is how much you can personally contribute to your 401K during a calendar year. Your employer’s maximum 401K contribution limit is entirely up to them – but the max on total contributions (employee plus employer) to your 401K is $58,000 in 2021 (or 100% of your salary, whichever is less). If age 50+, it goes up to $64,500 in 2021 with the catch-up contribution.
Technically, this means that your employer could contribute up to $38,500 in 2021, separate from your maximum personal contribution. Most do not contribute that much, however, and through after-tax contributions and an after-tax to Roth conversion, or “mega backdoor Roth“, it’s possible for you to contribute more than the individual contribution maximum in a given year (if your employer allows it).
Employer 401K Maximum Limit Discussion:
- What is your employer’s match?
- Did you think that your maximum contribution was your personal plus your employer’s?
- Are you going to max your 401K contributions this year?
Related Posts:
- What if you Over-Contribute to a 401K?
- Your Employer’s 401K Match is Not a Suggestion or Maximum
- 2020 & 2021 Maximum IRA Contributions
- 401K Matching
1. My employer’s match is 66¢ to my dollar after the first year, before that – nothing
2. I figured it was me only as most employers will state what max they will match
3.I won’t be maxing at this time until debts are paid down more, then I will increase slowly for less notice.
1. 3% flat + 100% match for the first 4% + 50% match for the next 4% => 9% employer contribution for 8% employee contribution
2. Never thought about it, can’t max anyways.
3. Need to get rid of home loans first.
1. Employer contribution is 3% of gross salary no matter what elective contributions are made.
2. No, I knew that the contribution limit is the employee contribution.
3. I will max my contribution this year. Hope to do the same with my fiancee (future wife) in the coming years.
1. 6%
2. Nope, I knew it was just my contribution
3. No, but I’m getting as close as I can right now (25% of my income)
1. 7%
2. that was my contribution
3. I am getting much closer now (33%)
1. 100% up to 6% of salary
2. Nope, I knew it was just my contribution
3. Not this year (single household income and all). I plan to next year.
1. 50% up to 6% of salary
2. just me
3. Yes, although I haven’t worked the whole year so I’m going to have to juggle the percentage withheld a bit.
1. 96 cents on the dollar up to 7% of salary.
2. nope, just me.
3. yes, I’m actually contributing more than the 7% match :-).
1. 25 cents for each dollar up to 6%
2. Never thought about this cos I only do 6% and didn’t reach near that ceiling yet
3. No, not yet .. home loan :(
I get a 200% match up to the IRS max of 16500
No, I knew it was 49,000 for the upper limit
Yes, I am maxing out.
1) Dollar for Dollar. No maximum.
2) No
3) Yes
Where do you work!!?
My employer does 4% automatically no matter if I’m on the plan or not but will match an additional 3% if I decide to contribute 3% for a total of 10%. Last year I saved 17% AGI in my Roth 401k.
My employer has indicated that they can not contribute to my 401k because the average salary in the company is too high. Is there such a IRS rule?
Open a ROTH Ira (after tax) and IRA account and max out both.
1) $1 from me = $1 from my employer with no maximum! That’s right, if I put in the maximum then they do too.
2) No, because I max out my 401k anytime I can. My employer encourages us to put most of our yearly bonus in 401k to avoid taxes and to double your money.
3) Yes, I don’t max out in monthly contributions but I do max out with my end of year bonus.
Where do you work? Are they hiring?
1) Employer matches 200% up to 5% contribution on first 40k earnings, and 100% match after that. So earning 80k, and 5% employee contribution you end up with 4k employee plus 6k employer for a total of 10k. No company max, just the gov’t limit.
2) Yes I did think/question that, which is how I found this page
3) No, and I never will max it out, I max my separate Roth account and have other investments. The 401k is only one portion of my retirement.
David – good for you that you are investing in your future. If your employer is willing to match your 401K investment dollar for dollar, I highly recommend that you stop investing in your Roth until you’ve maxed out your 401K first. With a 100% match, that is by far the best investment vehicle you will ever find because it immediately gives you a 100% return on your investment. Max that out and take advantage of an uncommonly high employer contribution. If you have anything left over for investing after that you can go back to the roth which is your second best investment choice.
Hi
My employer matches a 100% of 6% of my base salary. My question is:
Is the 6% of base salary the maximum by law for employers?
Thank you
Did you read the article?
I did and couldn’t find an answer to my question: does the IRS limit the percentage off the base salary to 6%? So if my company matches a 100% for 6% of my base salary, is this 6% the maximum dictated by IRS?
Thank you
“$51,000 (or 100% of your salary, whichever is less)”
Thanks GE Miller for your feedback
Assuming my gross salary is $80000 and I contribute a $1000 each month, that’s 12000 a year. Can the company match a 100% by contributing $1000 a month as well. So, combined it’s 24k which is the below the 51k you mentioned. Is this legal?
Some friends told me this is not legal!!! They claim the way it should be is (80000*6%)/12=400… Legally the company can contribute up to $400 ( a100% of the 6% of base salary).
Are they correct or is the first scenario acceptable by IRS?
Thank you
Some companies limit 401K matching to a random number like 6%. Mine matches 50% up to half of the individual maximum. So it varies by employer. But what I listed is what the IRS lists on its website, so I’d trust that vs. your friends.
http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics—401%28k%29-and-Profit-Sharing-Plan-Contribution-Limits
Thank you very much for your prompt replies. I agree with you… I couldn’t find the 6% being dictated by IRS anywhere on their website.
Enjoy your weekend
Great Article, little known facts. I understand 90% of CPA’s don’t know this.
Here is my question. How about AFTER TAX DOLLARS? if you have you’re own company can you deposit 52k in after tax dollars instead? It is my understanding there is a current tax loophole that allows you to roll after tax dollars, not matter how large(no limit 5500 or 6500) from your 401k to your Roth, also no income limits. So now that we know we can put 52k in…how much of that can be after tax? I would think the whole thing, but I’m not sure.
Yes. If are self-employed and have no employees you can do this. You can do this with employees, also, but it has to be the same for all employees. My wife and I own a company where she is the primary (80%) owner. The goal is to cap her salary at 146,000. Why this number? It allows the max contributions to 401k. She can contribute $18,5000 with her employee contribution. Then we can match up to 25% to get to the federal combined maximum. (25% of 146,000=$36,500; 34,500+18,500=$53,000). I work outside of the business as well for a traditional employer that matches 50% of up to 6% of my contributions. If I can max out my contributions/match, that is an additional $20,000. I can also take a salary from our company (business permitting) and take an employer contribution up to 25% off of that salary, as long as it stays beneath the federal limit of $53,000. In total, our goal is to contribute $106,000 into pre-tax 401k plans.
One thing that is implied there that I should clarify, you have to take a salary and the maximum employer match is 25% of you base salary. So in a self-employment situation, with a salary of 80,000, you cam make a pre-tax employee contribution of 18,500 and an employer match of 20,000 f(25% of 80,000) or 38,500 total for 2018.
My employer will match up to 6% of my base salary in contributions. They also contribute an additional 7.5% without any requirement for me to contribute (which they call “profit sharing”). So with my 6%, and the company’s 13.5%, my overall 401k contribution is 19.5% of my base salary.
I run my own s-corp with my wife. Our company policy is to match each personal dollar with two company dollars. So 200%, within gov’t limit.
If the 2014 contribution is $52000 can any portion of that be employer? For example can all $52K come from the employer or is there a benefit to having the employee contribute max %. (Thinking of negotiating deferred comp this way but having ownership of the $) Also, when over 50 does this maximum change?
I have the same question.
1. currently matches 6%
2. no
3. yes, always max it
They just ended our pension and are now going to do a full match on the first 10%, so that’s nice, but the pension was better
plz tell current limit minimum to maxmium of employrer scheme i n insurance.
b
$1 for $1 up to 15%
I’m 33 and have only been contributing $20-60 per week into the 401K since age of 25. However, its been 2 years since I started maxing out and now contribute $175 per week.
How common is it for employers to contribute such a high percentage?
I’ve talked to many people and have looked for articles related to my question but could not find any info.
Even my buddy, who just became a financial advisor, could not believe my employer is doing so until I showed my paperwork. He seems to believe only CEO’s from top Corporations have such benefits.
What is the employer’s end date for depositing their 2013 contributions into employee’s account? Jan – Aug 2013 they did a 1.5% match on first 3% and then in Aug combined 2 payroll offices into 1 (which had a 3% match on first 6%), all along other employees (combined new payroll ofc.) had been getting that 3% since Jan 2013. Us employees in CHI ofc have not seen Jan-Aug 2013 deposit and from Aug we started getting bi-weekly the 3% employer match as other employees. We have been losing interest on what employer’s match would have been for those 8 months while other employees have had the advantage of employer’s match being deposited all year.
I ask HR about his and I am told co. financial board is discussing. Something is not right.
1. employer’s match? 1 if I put in 1, then they give me 5%. So, total of 6% if you put in 1%.
Did you think that your maximum contribution was your personal plus your employer’s? Did not know – that’s why I’m reading this.
3. max your 401K contributions this year? I will max my contribution.
Looks like there are a lot of great company matches out there.
1. My company offers 9% just for being an employee. On top of that they will match dollar for dollar an additional 3%. So if you max out the company contribution they provide you 12%.
2. I did know know the max was only my contribution.
3. I am not hitting the IRS max because I am building up 6-12 months of expenses for an emergency fund.
Sounds like you work for a great company-would you share the name of your employer? I am looking to change jobs and would like these kinds of benefits.
Thanks
can the company contribute 100% of the 53000 max in a 401k plan to
a key employee account.??
In your example, the employer can contribute an additional $35K, can the employer contribute that amount to only certain individuals, like the owners and perhaps $5K to the rest of the employees?
Or…does it have to be the same amount to everyone?
If an employers offers a 401k with a match, they legally have to offer this to ALL full time employees, correct?
With everyone wanting to get back at ‘Corporate America’ you would think that having them donate to the workers 401K or 403B which may present tax breaks for the corporations would be frowned upon too. In losing the ‘retirement perks’ that once made the American workforce and Unions strong the American people have suffered again. How is anyone in their 40’s and below ever going to become retirement eligible! Perception is that is not want politicians who are no where near middle class Americans wages want anyone, they keep promising ‘free’ stuff and if the education system won’t teach our youth that there is NO SUCH THING AS A FREE LUNCH. The down trodden walk over them will continue.
Can my employer do the same matching for *ROTH* 401K’s too?
Roth is usually after tax dollars, so I bet that the employer cant but thought that I’d ask.
No. Matching goes into a pre-tax 401K, even if your contributions go into a post-tax Roth 401K.
Can my employer create a 401k without my knowledge?
Can my employer fund my 401k without my knowledge?
I learned of this after I left the company. The investment house that ran the 401k notified me that I had money that was part of “my 401k.” I had always declined being involved with this company 401k plan given its punitive nature regarding fees. And no, this wasn’t a mistake, the company had been funding “my 401k” for several years. And yes, I did collect the money and deposited into my IRA.
Any Ideas?
Unless you own the company they can create pensions and 401k’s or pensions without your input or permission. The way they set put the plan could have easily excuded you and only benefiited participants so you should be glad you received anything with contributing.
I am an S corp owner. Suppose I pay $60k annual salary to myself out of that 18k contribute to 401k.
According to your calculations my S corp can still contribute $36K or 60% of my total annual salary maxing out my 401k limit. Is it correct?
In your example above, can I request my employer to pay in the extra $37K, and I can pay them back, thru payroll deduction or some other method? A loophole would be nice..
1. 100% match up to 6%
2. No
3. No, not yet.
1. 75% up to 8% plus a fixed 3% to 5% of base salary based on my age. (For me it is currently 4%). Effectively that means I currently get 10%.
2. No.
3. Yes and have done so for many years.
1. My employer gives 18% of my gross income up to the max contribution amount, then continues to give that amount but as taxed income.
2. No
3. I will max out.
Okay, I think I’m more confused then ever! If I make $17,500, and I’m over 50, I can put in $17,500 only because it’s capped at my wages. Can my employer put another $17,500 in or are they limited?