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. 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 >>
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

    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.
  5. 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.
  6. Retirement

    IRA Contributions: Eligibility And Deadlines

    Use this checklist for contribution requirements to make your payments on time.
  7. Financial Advisor

    Retirement Planning for the Self-Employed

    How to select a qualified retirement plan if you are self-employed and have no employees.
  8. Personal Finance

    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.
  9. Retirement

    Maxing Out Your 401(k) vs. an IRA or Roth IRA

    What is the best way to save for retirement? Max out your 401(k)? Add an IRA? And what about the Roth? Your questions, answered.
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. Unit Benefit Formula

    A method of calculating an employer's contribution to an employee's ...
  6. Base Pay

    An employee's initial rate of compensation, excluding extra lump ...
Hot Definitions
  1. Nonfarm Payroll

    A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number ...
  2. Conflict Theory

    A theory propounded by Karl Marx that claims society is in a state of perpetual conflict due to competition for limited resources. ...
  3. Inflation-Linked Savings Bonds (I Bonds)

    U.S. government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, ...
  4. Peak Globalization

    Peak globalization is a theoretical point at which the trend towards more integrated world economies reverses or halts.
  5. Phishing

    A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The ...
  6. Insurance

    A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an ...
Trading Center