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Overtime Excluded in 401K Deduction Calculations


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My federal employer excludes overtime when calculating the amount that's deducted from my pay for 401-K plan contributions. They use my base salary. Is that correct? I thought it should be calculated on gross wages.

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it depends on plan provisions.  check the summary plan description.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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for example, the summary of plan description might read something like this (In this example Christmas bonus was excluded, I would expect your summary to indicate overtime is excluded.

Adjustments to compensation. The following adjustments to compensation will be made for purposes of salary deferrals:

 compensation paid prior to your becoming a Participant will be excluded

 Christmas bonuses are excluded

 

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