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 >>
  2. 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 >>
  3. 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 >>
  4. What are the 2014 401(k) contribution limits?

    Learn how limitations for 401(k) plans can change; find out what the contribution limits, annual limits and compensation ... Read Answer >>
  5. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Find out why contributions to IRA, Roth IRA and 401(k) retirement savings plans are limited by the IRS, including what the ... Read Answer >>
  6. Can catch-up contributions be matched?

    Learn about how the specific terms of your retirement savings plan dictate how and when your employer may match your catch-up ... 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

    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.
  3. Taxes

    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?
  4. Taxes

    401(k) And Qualified Plans: Contributions

    By Denise ApplebyA qualified plan may be funded by both employer and employee contributions. Contributions are mandatory for some plans and discretionary for others, but the limits on employer ...
  5. Professionals

    Retirement Planning for the Self-Employed

    How to select a qualified retirement plan if you are self-employed and have no employees.
  6. Financial Advisors

    Alert! Last Chance To Max Out Your Retirement Plan

    The end of the year marks the last chance for savers to maximize contributions to their 401(k), 403(b) and other retirement savings plans.
  7. Retirement

    Benefits for Members of the Armed Forces

    If your plans have been affected by your time in the combat zone, fear not!
  8. Retirement

    Job Hunting: Higher Pay Vs. Better Benefits

    Focusing on salary may be a mistake. Find out which benefits have the highest long-run payoff.
  9. Entrepreneurship

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  10. Retirement

    3 Reasons To Use An Employer-Sponsored Retirement Plan

    If you aren't participating in your employer-sponsored retirement plan, you're missing out! Learn the benefits.
RELATED TERMS
  1. Matching Contribution

    A type of contribution an employer chooses to make to his or ...
  2. 457 Plan

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

    A type of contribution an employer chooses to make to each of ...
  4. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
  5. Withdrawal Benefits

    The rights of an employee who has a qualified pension plan to ...
  6. Fair Labor Standards Act - FLSA

    A United States law which sets out various labor regulations ...
Trading Center