I mistakenly contributed too much money to my 401(k) account; can I withdraw some of my contribution so I'm eligible for my employer's match?
I contributed $18,500 to my 401(k) account in 2018. This means I can no longer contribute any more to the account, and I will lose the company’s match, of over $10,000. Can I withdraw some of the contribution I made to the 401(k)?
Don't act too quickly! You're safe - don't worry.
The $18,500 limit is based on "employee" deferrals only. So that limit only caps your personal decision to put into the 401(k) plan.
Your employer match will be put into your 401(k) ON TOP of that amount. The limit set by the IRS for 2018 is $55,000 per year total deferral between employee AND employer.
So in short - you're safe. You've maxed out your contribution (unless you're over the age of 50, as then you get an additional $6,000 catch-up) and your employer is still required to put in your matching contribution.
Assuming you meet the minimum employee deferral percentage (typicially 6%), your employer match is based on your annual income, not on the amount of your deferral. You should not have to do anything to take advantage of the full employer match.
The maximum elective employee elective deferral for 2018 is $18,500 and if you are age 50 plus in 2018, you may contribute an additional $6,000 for a total of $24,500 in 2018. Thus, it is possible that you have not contributed too much for 2018. The cap in 2017 was $18,000. Also, most employer matches use a percentage of compensation for the match formula. For example, matching the first 6% of compensation up to 50%. That equates to a 3% of pay match.
You would not lose this contribution by maximizing your 401k elective deferral. The match is a function of you compensation before taxes, not net of taxes. Thus contributing pre- tax does not reduce your compensation for the match, only for the taxes you would pay to Uncle Sam. You get to save what you would have had to contribute to Uncle Sam by maxing your 401k contribution. It’s a good move for you! Congratulations!
Charlotte Dougherty is a registered representative of Lincoln Financial Advisors a broker/dealer (Member SIPC) and registered investment advisor. Dougherty and Associates is not an affiliate of Lincoln Financial Advisors. Lincoln Financial Advisors does not offer legal or tax advice. CRN-2045636-030218
Great question, and this is not too unusual of a situation. Andrew is right, however in that most plans have a "true-up" provision where they will provide the necessary match at the end of the year. Not all plans have this in their plan document though, so it's important to ask your HR professional to find out. If they don't know then ask them to ask the Third Party Administrator, and they will be able to confirm it. It is incredibly difficult to get funds out of a 401(k) plan even if they mistakenly were contributed unless you over-contributed. If your plan does not have the true-up provision then it is unlikely you have a solution this year, unfortunately.
I have not heard of anyone being able to pull contributions back out of a 401(k) once made. I have however heard of more companies than not doing an end of year true-up for exactly this situation. You may already know the answer, but if not I wouldn't assume that your company doesn't make an end of year matching contribution. This is likely and quite honestly what most companies should be doing as it is very painful to have to compute throughout the year what percent you need to maintain in order to have the last paycheck max out your contributions.