Do Employer 401k Contributions Count Toward the Max?

October 9, 2006

Short answer - no. In a 401(k) the employer match does not count towards the annual maximum contribution. In 2006 the IRS limits your maximum contribution to $15,000 (plus $5,000 catch-up contribution for those over the age of 50). In 2007 the contribution limit is $15,500. The 2008 401k contirbution limit is $15,500.

Learn how to max out your 401k contribution.

Tags: 401k, retirement,

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Comments (9)

Total match has to be under $44,000 and how you get to that number doesn't matter. Company contributions can be upto 25% percent of your salary, $15,000 personal contribution and any combination of the two can be used to achieve the $44,000.

Obviously, this only matters if you either own your own business or there is a C at the beginning of your title.

I am planning a detailed write up on the benefits of 401k tax sheltering for small side businesses, but I have not finished it up yet.

Posted by Qbrain | October 13, 2006 8:53 AM

Good! I contribute 25% and I was going to be pretty disappointed if the company match counted toward the 15k.

Actually, I didn't even think about it until I read the post. I need to be on top of my game more.

Posted by Binary Dollar | October 26, 2006 7:18 PM

So if you own your own business there is no way to max that out before your salary is $116,000?

For your first $15,000 salary you could contribute 100% on a personal level (which you can do before you pay taxes on it). Then you'd need 4x$29,000 because the company can only contribute a maximumn of 25% of your income?

Does anyone do anything like that?

Successful Personal Finance

Posted by Catch a Gideon | October 28, 2006 1:08 AM

I am a "highly compensated employee" at my company. This status results in my maximum 401k contribution to be significantly less than the $15,000 allowed by law. Question, is there a tax deffered retirement method/instrument, outside of my companies plan, that I can contribute to to enable me to max out my allowable $15,000?

Thanks,

Posted by Rocky | November 8, 2006 12:29 PM

Congrats on being a highly compensated employee!

Best consult an expert, but I will tell you what I would do. 1) I don't think your high compensation is keeping you from contributing the max - its the high compensation and the low contributions of everyone else at the company -- its time to promote the 401(k) to the rest of your fellow employees!

2) The only other real way to take advantage of this is with self-employment income - you could open a solo 401(k) or other retirement plan as some of them will allow you to make contributions. the total of contributions from some of your self-employment retirement plan options and your employee 401(k) would be 15k. There is a lot of extra details on self-employment retirement plans that i am skipping so read up.

Posted by 2million | November 8, 2006 12:36 PM

My husband's company does not offer 401(k). Does that mean I can contribute 30k/year (15k*2) max?

Posted by TinaM | November 29, 2006 10:17 AM

My understanding is no. You can only contribute up to the max (currently $15k) per person.

My suggestion would be to look at whether it would be more benefical for you husband to become a contractor ( self -employed) so he could set up his own retirement plan (SEP IRA, self employed 401(k), etc).

Posted by 2 million | November 29, 2006 10:31 AM

It should be noted also that employer contributions do, in fact, count towards the total contribution if the match is greater than 6%.

Posted by Adam | December 20, 2006 2:25 PM

If i make $150,000.00 2008 what the maximum i can contributionthe in to 401K , 403b,

Posted by rj White | March 1, 2008 6:14 PM