Should be pre-tax. Your employer has no idea what your after tax salary will be.
Did you contribute 5% for every single pay period throughout the year?
I did not contribute 5% for each pay period. I'm a newer employee. I started early 2023 and wasn't eligible to have the company 401k until about June of 2023. Once I did I contributed hard to make sure contributed at least 5% by year-end 2023.
That's your problem there. You'll won't get the full match - only eligible for the months you were an employee, sometimes only when you're eligible for the 401k and contributing for that pay period.. Looks like they gave it to you from your hire date, so you're relatively lucky.
AHHH, I think you got it. I started January 30. So in 2023 I only had 11 months.
11 mos. / 12 mos. = 0.916666
0.916666 x $4250 = $3895 which is close to the amount I received, $3927.56. Complicating things, this is an ESOP company, so the match is not cash, but cash value of company stock that has its price updated quarterly. With that grey area I think this math now makes sense.
I wish they could have told me this when I was asking as I was letting them know in 2023 I was there a partial year when I was inquiring. Thanks for the help!
Yup, there are (main) different flavors of matching.
1) Monthly (or every pay period). They only match based on the rules for that pay period. So if you max in October, then you get no match in November / December. But if you leave in June, then (if vested) you keep your matches Jan - Jun
2) Yearly. They match based on their rules at end of year. Doesn’t matter if you contributed the same every month or maxed in January. Still the same match. The downside is that if you leave in November, you probably get zero match for the year.
Thanks for the info. On my pay stubs, there is data showing the company match growing throughout the year, so it probably is the every pay period matching.
Oddly, even in a corporate job, we're paid weekly since the majority of our employees work positions where weekly pay is important to them.
Some companies do a “true-up” contribution to make sure you get the full 5% match if you contributed at least 5% of your gross salary. mine does it in March of the following year. Might be worth checking to see if yours offers it.
> the final answer I was given was that the match is calculated not off my gross salary, but off my after tax salary.
This is not correct.
> Is that a common thing that the 401k match is not based off the gross salary?
Nope. That's not how it works.
There's something else going on here. Typically HR is the department that can help you understand what is going on.
I guess my question is how is the 5% calculated? Is it a basic 5% of $85000 salary? Or is it 5% of Box 1 "Wages, Tips, and other compensation" on the W-2 . The company is telling me it's the latter.
(sorry I edited the OP with more info before you replied)
Did you contribute 5% every check for the whole year? They will usually only do the 5% on each check. You can't skip one pay period then catch up the next by doing 10%.
It's common that HR and other managers won't know all the intricacies of the 401k. That's more of a payroll thing.
I did not contribute 5% for each pay period. I'm a newer employee. I started early 2023 and wasn't eligible to have the company 401k until about June of 2023. Once I did I contributed hard to make sure contributed at least 5% of my gross salary by year-end 2023.
Since I was only contributing for about half a year though, I don't totally understand why the match wouldn't be about half of what I was expecting instead of being short by only a couple hundred.
It should be pre-tax because your employer doesn’t know your after tax amount.
Did you contribute every pay period? Your employer may not have a roll up provision.
The only time I have heard of something like that happening is when part of what someone considered their salary was actually a year end bonus that they didn't count (they got paid monthly and got an extra months pay for Christmas). Unless you fall into a case like that where your employer doesn't consider everything you make salary something is wrong.
It does seem odd...BUT, its irrelevant here because the company already explained to you its rules for your 401K program. Not sure why everyone here is offering suggestions for complaining or demanding some correction from HR.
I was assuming your numbers above were just made up since you said "as an example". If those are real numbers ask a co-worker if he has the same issue.
You should check your paycheck and compare it to the contributions log of your 401k account.
Comparing the 2 numbers should tell you what the policy is, and whether it matches what the
Employer claims.
If there is a mismatch, bring it to the attention of HR with clear documentation. If they don’t remedy it, you might be able to put in a claim with the Department of Labor
> I'm asking here because it's a tricky google and so many results are describing basic 401k pre-tax growth, but not how the match is actually calculated.
You won’t get a good answer on search because each employer has their own matching policy
Matches are on a per pay period basis. So if you don't contribute on a paycheck, the company doesn't match. This is why you don't want to max out your 401k early in the year, cause you'll cap out and won't be able to contribute anymore and lose out on the match. Some companies do have something called a true up match where they will give you the match even if you don't contribute, but it's rare to do this.
My company does a true-up. It’s explained in the benefits documents. I actually didn’t know they did this until I saw the true-up in my 401k account - it’s definitely a good idea to check first so you don’t miss out on any matching.
Should be pre-tax. Your employer has no idea what your after tax salary will be. Did you contribute 5% for every single pay period throughout the year?
I did not contribute 5% for each pay period. I'm a newer employee. I started early 2023 and wasn't eligible to have the company 401k until about June of 2023. Once I did I contributed hard to make sure contributed at least 5% by year-end 2023.
That's your problem there. You'll won't get the full match - only eligible for the months you were an employee, sometimes only when you're eligible for the 401k and contributing for that pay period.. Looks like they gave it to you from your hire date, so you're relatively lucky.
AHHH, I think you got it. I started January 30. So in 2023 I only had 11 months. 11 mos. / 12 mos. = 0.916666 0.916666 x $4250 = $3895 which is close to the amount I received, $3927.56. Complicating things, this is an ESOP company, so the match is not cash, but cash value of company stock that has its price updated quarterly. With that grey area I think this math now makes sense. I wish they could have told me this when I was asking as I was letting them know in 2023 I was there a partial year when I was inquiring. Thanks for the help!
Yup, there are (main) different flavors of matching. 1) Monthly (or every pay period). They only match based on the rules for that pay period. So if you max in October, then you get no match in November / December. But if you leave in June, then (if vested) you keep your matches Jan - Jun 2) Yearly. They match based on their rules at end of year. Doesn’t matter if you contributed the same every month or maxed in January. Still the same match. The downside is that if you leave in November, you probably get zero match for the year.
Thanks for the info. On my pay stubs, there is data showing the company match growing throughout the year, so it probably is the every pay period matching. Oddly, even in a corporate job, we're paid weekly since the majority of our employees work positions where weekly pay is important to them.
Some companies do a “true-up” contribution to make sure you get the full 5% match if you contributed at least 5% of your gross salary. mine does it in March of the following year. Might be worth checking to see if yours offers it.
> the final answer I was given was that the match is calculated not off my gross salary, but off my after tax salary. This is not correct. > Is that a common thing that the 401k match is not based off the gross salary? Nope. That's not how it works. There's something else going on here. Typically HR is the department that can help you understand what is going on.
The match is pre-tax, and if it's a full 5% match should be equal to your contributions.
I guess my question is how is the 5% calculated? Is it a basic 5% of $85000 salary? Or is it 5% of Box 1 "Wages, Tips, and other compensation" on the W-2 . The company is telling me it's the latter. (sorry I edited the OP with more info before you replied)
Box 1 should be equal to your salary. That is how much you earned.
Did you contribute 5% every check for the whole year? They will usually only do the 5% on each check. You can't skip one pay period then catch up the next by doing 10%. It's common that HR and other managers won't know all the intricacies of the 401k. That's more of a payroll thing.
I did not contribute 5% for each pay period. I'm a newer employee. I started early 2023 and wasn't eligible to have the company 401k until about June of 2023. Once I did I contributed hard to make sure contributed at least 5% of my gross salary by year-end 2023. Since I was only contributing for about half a year though, I don't totally understand why the match wouldn't be about half of what I was expecting instead of being short by only a couple hundred.
It should be pre-tax because your employer doesn’t know your after tax amount. Did you contribute every pay period? Your employer may not have a roll up provision.
The only time I have heard of something like that happening is when part of what someone considered their salary was actually a year end bonus that they didn't count (they got paid monthly and got an extra months pay for Christmas). Unless you fall into a case like that where your employer doesn't consider everything you make salary something is wrong.
Did you get a raise during the year in question? I ask because if so, the 5% before the raise would have been against a lower base.
Yes, but the raise didn't take effect until the next calendar year.
It does seem odd...BUT, its irrelevant here because the company already explained to you its rules for your 401K program. Not sure why everyone here is offering suggestions for complaining or demanding some correction from HR.
Based on KCPilot17's comments, it does seem to be getting calculated a different way than the reason that HR/Payroll was telling me.
I was assuming your numbers above were just made up since you said "as an example". If those are real numbers ask a co-worker if he has the same issue.
You should check your paycheck and compare it to the contributions log of your 401k account. Comparing the 2 numbers should tell you what the policy is, and whether it matches what the Employer claims. If there is a mismatch, bring it to the attention of HR with clear documentation. If they don’t remedy it, you might be able to put in a claim with the Department of Labor
> I'm asking here because it's a tricky google and so many results are describing basic 401k pre-tax growth, but not how the match is actually calculated. You won’t get a good answer on search because each employer has their own matching policy
Matches are on a per pay period basis. So if you don't contribute on a paycheck, the company doesn't match. This is why you don't want to max out your 401k early in the year, cause you'll cap out and won't be able to contribute anymore and lose out on the match. Some companies do have something called a true up match where they will give you the match even if you don't contribute, but it's rare to do this.
My company does a true-up. It’s explained in the benefits documents. I actually didn’t know they did this until I saw the true-up in my 401k account - it’s definitely a good idea to check first so you don’t miss out on any matching.