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)

Hot Definitions
  1. Return on Market Value of Equity - ROME

    Return on market value of equity (ROME) is a comparative measure typically used by analysts to identify companies that generate ...
  2. Majority Shareholder

    A person or entity that owns more than 50% of a company's outstanding shares. The majority shareholder is often the founder ...
  3. Competitive Advantage

    An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers ...
  4. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected from many investors for the purpose of investing in securities ...
  5. Wash-Sale Rule

    An Internal Revenue Service (IRS) rule that prohibits a taxpayer from claiming a loss on the sale or trade of a security ...
  6. Porter Diamond

    A model that attempts to explain the competitive advantage some nations or groups have due to certain factors available to ...
Trading Center