Employers Responsibility regarding 401K contributions

[Guest 3mj]

My employer hired me as a "full time employee" that works a minimum of 37.5 hrs per week. I have asked my employer to take 7% of my pay and put it towards my 401K. The problem is, they only take 7% out of 37.5 hours. If I work over 37.5 hours the contribution remains the same, so my 401k contribution ends up being less than requested, usually averaging 6.25-6.50%. Isn't 401K's based on Gross Pay, not hours worked? Is my employer allowed to contribute on the "assumption" of hrs worked and not the "actual" hrs worked? Haven't been able to find this answer anywhere, Are there any rules or laws that govern this ? We are new to the site, Thanks in advance for the replys!

[david rigby]

Difficult to answer your questions without more info. Strongly suggest you obtain and read the Summary Plan Description (SPD) for the plan. (BTW, you should have already been provided an SPD.)

The SPD will include a summary of pertinent plan provisions, and may provide some answers. However, the terms of the actual plan document are controlling. (The plan must be a formal written plan document, not merely a promise by the employer.) If you want to read it, or obtain your own copy for a nominal fee, then the employer must make that available to you.

You may also find useful reading material on the DOL website. For example,

http://www.dol.gov/ebsa/faqs/faq_consumer_pension.html

http://www.dol.gov/ebsa/consumer_info_pension.html

[Earl]

I have run into payroll services that can only take fixed dollar amounts, not percentages of pay, into their system. (And others that give the employer the option, on a plan wide basis, of taking % or $, but not mixed.)

This may be the position your employer is in. And, if so, it seems they could tell you that and you could set up a higher fixed amount so that you will hit your goal at the end of the year.

[austin3515]

It is also possible that the plan is written to exclude overtime. Why anyone would do that in the EGTRRA world is beyond me, but not everyone eliminated the old provisions. (i.e., pre EGTRRA, there was incentive to limit the amount of deferrals because they were in included in the tax deduction limit for pension contributions, so limiting deferrals was common).