A:

The regulation (law) that addresses your specific question has not changed. However, both employers may be right. Here's why:

The regulations allow the employer to determine, to a certain extent, what is defined as "eligible compensation/pay" for the purposes of determining contributions to the plan. For instance, some plans include overtime pay in the definition of compensation for salary deferral purposes, while others may not.

Here's an example: assume that the plan does not include overtime in the definition of compensation and limits your salary deferral to 10% of your compensation. If you earn $10,000 as regular (straight time) pay and $1,000 in overtime, you would be allowed to defer up to $1,000 to your 401(k) because your limit will be 10% of your straight time pay.

If you cannot contribute as much as you would like to, all is not lost. If you have extra funds you want to contribute to a retirement account, you may consider making a contribution to an IRA.

This question was answered by Denise Appleby
(
Contact Denise)

RELATED FAQS
  1. Should I only contribute to an IRA?

    My employer 401k contributes 3% of my salary regardless if I contribute money or not (there is no matching). I would ... Read Answer >>
  2. I have several jobs. Can I contribute the maximum to multiple employer retirement ...

    It depends. A question such as this requires detailed information in order to provide a helpful response. Here is a general ... Read Answer >>
  3. Am I eligible to contribute $6,500 to a Roth IRA or a regular IRA?

    I have been saving the max $24K in a Roth 401k. I have a salary of $225K and own a small business with about 11 employees, ... Read Answer >>
  4. Does my employer's matching contribution count towards the maximum I can contribute ...

    No, your employer’s contribution does not count toward your contribution to your 401(k) plan. In 2016, an employee can contribute ... Read Answer >>
  5. Can you have a 403(b) and also contribute to a 401(k)?

    Yes. You may participate in both a 403(b) and a 401(k) plan. However, certain restrictions may apply to the amount you can ... Read Answer >>
  6. My husband has become eligible for a 401(k) plan (with no matching contribution) ...

    Your husband's employer should check the retirement plan box on line 13 of the 2005 Form W-2 only if your husband elects ... Read Answer >>
Related Articles
  1. Retirement

    It’s Never Too Late to Contribute to Your 401(k)

    Find out why it is never the wrong time to start contributing to a 401(k), even in your late 30s, 40s or 50s; discover how to maximize your savings at any age.
  2. Retirement

    401(k) Contribution Limits in 2016

    Find out what the contribution limits are for 401(k) retirement savings plans in 2016, including individual, employer and aggregate limits.
  3. Retirement

    How 401(k) Matching Works

    Find out how employer matching of your 401(k) contributions works, including how employer contributions are calculated and annual contribution limits.
  4. Retirement

    How To Save More For Your Retirement

    The Economic Growth and Tax Relief Reconciliation Act of 2001 made it easier to prepare for the future. Will you be ready?
  5. Retirement

    Why are 401(k) contributions limited?

    Find out why contributions to 401(k) retirement plans are limited, including what the current contribution limits are and how limits encourage participation.
  6. Retirement

    Common Questions About Retirement Plans

    We offer some solutions for the individual taxpayer as well as the small business owner.
  7. Retirement

    How Much Can You Contribute to Your 401(k)?

    Given the fairly high compensation limits on these retirement plans, most workers can pitch in more than they currently do.
  8. Retirement

    IRA Contributions: Eligibility And Deadlines

    Use this checklist for contribution requirements to make your payments on time.
  9. Retirement

    Retirement Planning for the Self-Employed

    How to select a qualified retirement plan if you are self-employed and have no employees.
  10. Retirement

    Job Hunting: Higher Pay vs. Better Benefits

    Focusing on pay when job hunting may be a mistake. Find out which benefits have the highest long-run payoff.
RELATED TERMS
  1. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
  2. Savings Incentive Match Plan For Employees Of Small Employers - SIMPLE

    A retirement plan that may be established by employers, including ...
  3. 401(k) Plan

    A qualified plan established by employers to which eligible employees ...
  4. 457 Plan

    A non-qualified, deferred compensation plan established by state ...
  5. Nonelective Contribution

    A type of contribution an employer chooses to make to each of ...
  6. Unit Benefit Formula

    A method of calculating an employer's contribution to an employee's ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center