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Can an employer place a new employee's signing bonus as contribution to the employee 401(k) plan?

I read a forum thread on https://www.bogleheads.org/forum/viewtopic.php?t=136413 (mirror) on that topic but no definitive answer was given.

  • Are you asking this because they did and you don't want them to, or because they didn't and you want them to? – RonJohn Dec 30 '17 at 14:48
  • @RonJohn neither, just curious. – Franck Dernoncourt Dec 30 '17 at 19:28
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Sure, why not?
A signing bonus is just Income with a fancy name, and as such is taxable, and can be used for 401k contributions, just like other income, within the same limitations.

The more difficult question would be if the employer‘s 401k plan supports it, but that depends on each employer‘s plan of course.

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I have worked for companies where the annual profit sharing is placed as a company contribution into the 401K.

This allows the money to be deposited into the account but still allow the employees to make their 18.5K deposits. Because this is a company deposit and the employee is not taxed, this isn't Roth money but it does grow tax deferred.

It might be possible to ask that the signing bonus be contributed this way. Though the company accountant will have to review the rules.

If the company can't allow you to directly contribute the signing bonus into the 401K, you can do the same thing by upping your contribution rate for a few paychecks to achieve the same goal. Keeping in mind the annual contribution limits and making sure you don't reach the maximum too soon and limiting your company match.

  • Thank you. "annual profit sharing [may be] placed as a company contribution into the 401K." -> that's good to know! – Franck Dernoncourt Dec 30 '17 at 20:35

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