Do we need to worry about "maxing out" our 401K limit and the company won't match their part any more?

Question

Let's say, if the company would match my 401K contribution, up to 4.5%, and with the current 2020 limit of $19500 and $6500 for age 50 and above for catch up, it is $26,000.

Each paycheck every two weeks, we can elect to contribute up to 75% of our pay towards 401K, and the company will match 4.5% of that current paycheck. The company will match the bonus paycheck as well.

(even though we can contribute up to 75%, I think most people will contribute at most 20% or 30%).

But what if we contribute too much, and after half of a year, we have already reached the $26,000 limit? At that point, will the company find that, "we'd like to keep on matching 4.5% of your paycheck, but since you have already maxed out the amount, you can't contribute any more and therefore, we can't keep on matching"?

There are some things technical:

1. Is the $26,000 my part only and the company's contribution doesn't count in this $26,000 limit? (so the final amount of myself plus the company's portion can be more than $26,000 and maybe something like $35,000?)

2. Can the "max out" too soon situation like above occur? What if the company has "true up" policy, then they would at the end of year, calculate what they "could have matched" but didn't match, and deposit it into my account a few months later? (but that would already be quite some time later).

3. So in that case, is it better just to contribute "smoothly", with the wage and bonus considered, so that around the time of end of December, it reaches or get near to the limit of $26,000? (but with the bonus that is more or less than expected, and with the possible change of wages, it may be hard to estimate).

Answer 1

What happens in the situation you describe depends on company policy. You must ask your company, we cannot tell you.

To answer your questions:

1. The contribution limit applies to your contributions. The company's matching funds go on top of them.
2. Yes, depending on company policy, it's possible that you will miss out on the company match if you don't contribute in every pay period. Some companies make a true-up contribution in the following year that makes up for the missed matching contribution. It is also possible that a company could calculate the match to your annual salary, rather than your pay period salary, so you would capture all of the match as soon as you make the maximum contribution.
3. The safest thing to do is make sure you contribute enough in every pay period to capture the maximum match. Then you're not dependent upon the company's future true-up contributions. These types of policies can change at any time, without notice to you, so better safe than sorry.