# Why 401K contribution as whole % rather than in quarter percent resolution [duplicate]

I asked another question, and there are reasons for employers to keep it in percentage of salary instead of fix dollar amount.

But what is harm in making it a fraction of a percent, like permitting 5.5% or 5.25% with a lower limit of say 1% to upper limit of 70%, but any number in units of 0.25% for example 1.25%, 1.5%, 1.75%, 2% or 69.25% and so on?

• My current employer allows quarter percent resolution. Some I've had in the past allowed whole numbers only. One employer I had allowed you to specify in basis points (i.e. hundreths of a percent). I don't think there's a clear standard, which makes a question of "why is X the standard, instead of Y" hard to answer. – dwizum Nov 22 '19 at 14:26
• I've also seen it as a dollar value deduction rather than a percentage. – Eric Nov 22 '19 at 17:40

There's no harm - some providers apparently just choose to only use whole numbers. If this is a problem for you, talk to your benefits department and see if there's a way to choose a non-whole number off-line.

0.25% per paycheck of a \$50,000/year salary is only \$4.81. 401(k) administrators might just Keep It Simple and stick to integer values (since there's no worry about floating point rounding errors and it simplifies the programming a bit).

I agree with @dwizum though:

I don't think there's a clear standard, which makes a question of "why is X the standard, instead of Y" hard to answer.

• I don't think it is right way to think 0.25% of 50 is \$4.81 per pay check on bi-weekly check. if you want to think that way then think that an unfortunate but a person who is still planning for his/her future, if instead of saving 2% i.e \$38.46 per check can save at 2.25% ( if not 3%) then that person will be saving \$125 per year extra. – mina Nov 22 '19 at 19:01
• @RonJohn: The part of this that makes the most sense is the fact that the people writing the software have a perspective of processing individual paychecks. The employee doesn't, since the money isn't available until retirement. The employee cares about 0.25% of 40 years of income.... and possibly also 0.25% of one year of income (if concerned about the annual limit). For those purposes, even 0.25% may be too coarse... on an annual basis that's an increment of several hundred dollars. Once the increment becomes larger than a single-check deferral, you can no longer spread it over the year. – Ben Voigt Nov 22 '19 at 19:13
• @mina what I wrote is mathematically correct. You're arguing an opinion, and that opens the question to "Vote To Close - Primarily Opinion Based" actions. – RonJohn Nov 22 '19 at 19:13
• @BenVoigt yes, I understand. The only valid answers to this question are opinions. Should I delete my answer and VTC POB? – RonJohn Nov 22 '19 at 19:15
• @RonJohn I have absolutely no problem with the comment, what I want to say is best summarized by Ben Voigt – mina Nov 22 '19 at 19:43