401(k) Match Maximizer is Here!

I have previously wrote about a little gotcha with my 401(k) plan that causes me to miss a portion of my employer's 401(k) unless I time my contributions perfectly.

I got word this morning that my employer is announcing a 401(k) Match Maximizer that will provide the full employer match regardless of when you hit the IRS contribution limit that is retroactive to January 1, 2006.

This feature helps in a couple of ways:
1) No need to worry about timing contributions just right to make sure you get the full employer match
2) While I don't necessarily subscribe to this - you can now pick another investing style (instead of dollar cost averaging) with your 401(k) contributions (without forgoing some of the employer match). For instance if the market had a sharp correction in the beginning of the year, in theory you could try to make the bulk of your 401(k) contributions (if not all) in the early part of the year, hit your IRS limit before June, and still receive the entire employer match. This is great for people that want to try and time the market.

Its all about flexibility - I like it and I am excited I no longer have to worry about trying to get every penny of my employer's contributions.

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Comments (7)

DATE: 10:09 AM
Wow, that's pretty cool. It is rare that you have a company that says, hey! We haven't given away enough money! Let's make sure we give away as much money as possible to our employees.

DATE: 9:51 PM
Forget about maximising things, if the World goes into a depression, your house which is your bigggest debt will cause you headaches you never dreamed of.Anonymous Millionaire.

DATE: 4:34 AM
What are the details, for example, if you max out contributions in January 80%, and hit the limit, and you leave IBM in the middle of the year? Do you still get the max match up the point you leave?

DATE: 8:53 AM
freedumb,That is a very good question - I don't know but I intend to find out - I suspect you don't get it.

DATE: 11:09 PM
My company does the same as yours, it's called a "True-up" contribution. The only downside for me was that they made the "True-up" contribution in late April 2006, for the 2005 401K contribution. As is, I lost 4 months of market gains on about $500 of match contribution. This year I'm planning my 401K contributions to hit my max in the last pay period in December - thus, no "True-Up". This strategy is similar to not overwitholding on your income taxes which gives an interest free loan to the government with your money. In my case, I have a 4 month free interest free loan and I lost out on the market appreciation - won't make that mistake again. Check when IBM will make the "match true-up" contribution in 2007 before you decide on whether it's that good of a deal. Of course, it's better than losing the match altogether...

DATE: 11:45 AM
Good point - I am happy they are offering this new feature - I lost some match last year by hitting the contribution limit too early.However, your right - Im sure its better to plan to hit the contribution limit in the last paycheck - I am doing so, but its nice to know if something goes wrong I won't lose out completely like last year.

This can also be a real problem if you are on commission or have other irregular income.

I am on salary, but one of our salesmen had this problem.

As you know commissions are not always regular. He made a big sale and got a large commission check in January. He put 10K toward his 401K ($14k limit). A couple of months later the company re-instated a Safe-Harbor matching program (Company matches 4% of the first 5% of each months paycheck)and he could not get all he should.

If he had only paid 5% per month he would have gotten the full 4% match. But with the big initial payment, he could not put 5% per month the rest of the year without going over the $14k limit.

They did not have any True-up provision.

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