Comments on: 401(k) “Additional Company Match Contribution”

By: Michael

Michael — Thu, 21 Jul 2011 14:43:19 +0000

Larry has it right. This is called a “True Up Contribution”

By: Cathy

Cathy — Wed, 21 Oct 2009 00:48:13 +0000

That is not why. It is to satisfy the top heavy discrimination testing. It is based on the contributions of the employee and their salary relative to the highest paid person in the firm.

By: Cathy

Cathy — Wed, 21 Oct 2009 00:46:20 +0000

As a small business owner, I have had to do this additional funding for employees that don’t contribute.

If the higher salary employees contribute more than the lower salaried, the plan can be “top heavy”.

The govt. requires the business owner to add to some accounts in order for the “top heavy” discrimination not to fail.

By: Larry

Larry — Fri, 05 Oct 2007 16:20:10 +0000

I think I know what this is saying. I’ll explain by example. Say you earn $120K per year = $10K per month. You specify contributing 20% (2K/mo) to your 401(K). Company matches half of the first 6%. First month company match is $300 (6% of your income is $600, company matches half). Same through month 7. Through 7 months, you’ve contributed $14K. Annual limit is $15K. So in month 8, you contribute only 1K, but this is greater than 6%, so you still get the $300 match. Now you’re at the annual limit, so you don’t contribute anything in months 9 thru 12.

For the year, you earn 120K. You’ve contributed 15K to your 401(K). 6% of 120K is 7.2K. Company match should be half of that – 3.6K. But you only got matches the first 8 months, 300 per month, total of 2.4K. So I think the letter is saying that the company will chip in the remaining 1.2K at the end of the year.

By: Amy

Amy — Mon, 23 May 2005 19:31:17 +0000

This might not be relevant, but my (very small) company has, in the past, contributed to an non-participating employees 401(k) account because it was top heavy.

By: Tim

Tim — Mon, 23 May 2005 16:07:19 +0000

If true, wouldn’t you contribute the smallest amount possible, or none at all, if you knew the Company would give you more to make up the difference? Something doesn’t sound right here…

By: FMF

FMF — Mon, 23 May 2005 12:56:12 +0000

I vote with Nickel. Go talk to HR. If they don’t have the answer (which sometimes they won’t), contact the plan administrator.

By: nickel

nickel — Mon, 23 May 2005 04:56:26 +0000

Any idea why my comments sometimes appear in giant text?

By: nickel

nickel — Sun, 22 May 2005 23:42:33 +0000

You’re right… It’s not completely clear what they are talking about. I would advise your girlfriend to give Human Resources a call.
–
fivecentnickel.com

By: Dawn

Dawn — Sun, 22 May 2005 22:50:40 +0000

It wouldn’t be some sort of ‘bonus’ deal for some reason? I’ve never heard of that, I would go to HR and find out the truth before I got my hopes up. That’s me though.

By: jim

jim — Sun, 22 May 2005 02:43:04 +0000

I would think that too except they’re expliciting adding additional money to her 401k above and beyond what was matched the first time around. They’re going to put in more money for Q2 which is a little strange, don’t you think?

By: Dawn

Dawn — Sat, 21 May 2005 21:44:17 +0000

I’m thinking it’s just like a general letter my company sends out. “make sure you put in your pre-tax dollars and we match it” then at the end of the year they make sure everyone has the correct match and will “add to it” if something is off. I don’t get the impression they are Giving away anymore money than the match.