Can the Employer Limit the Employee Contribution to 401Ks?

I run a boutique in Phoenix and employ 6 people. Do I have any control over how much of their salary goes into the 401K?- Jessie Marco, Phoenix, Arizona.

Your employees have a lot of freedom in deciding the amount they contribute to their 401K from their paychecks. However, you do have a say in this issue. Typically, it is ideal for you to encourage your employees to stick to the 15% of paycheck limit to make contributions. But you can lower this limit if you have some strong reasons to do so.

If you do offer a lower contribution limit, then your employees can make a special request to raise the bar for their contributions. While you can reject the request, it is a good idea to remember that the 401K is one of the best ways for your employees to save for their retired future. Given this, letting them save as much money as the IRS allows is definitely in their best interests. And taking care of their best interests is a great way to boost employee morale and raise productivity levels.

At a later date, if and when it becomes necessary to tweak your plan or move to a new one, you can always make the necessary changes at that point. If you use a feature rich online 401K tool then this should not take much time or effort. If you haven’t signed up for such a tool yet, take a look at http://401k-network.com, where you will find a comprehensive directory of various 401k internet tools in the market.

About Elliot Earl, Director, Pension Trade Association
Director, Pension Trade Association Founded in 1982, the Pension Trade Association [California Domestic Nonprofit Corporation #C1629080] is dedicated to helping workers save for their retirement through expanded coverage of 401k -type defined contribution pension plans.

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