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I would like to take advantage of the increased employer contribution limit. I realize that my employer cannot change our plan for just some people. But what if it was for all employees? How creative can you set up these 401K plans?

For example, could my employer allow all employees to receive a percentage of their wages as contributions to their 401k up to the max employer contribution? There would not be a match involved. Just the ability for the employee to increase their 401k contribution and reduce their regular take home pay.

Also, I am under the understanding that if the employer gives you less traditional wages, they can save money in certain tax respects. Yes/no?

  • To clarify. You employer has a 401(k) plan now. You contribute the maximum employee contribution of $18,500 now. You would like to devise a way to take advantage of the additional maximum employER contribution limit even if it's, somehow, at your own expense? Setting aside a percent of your compensation to be contributed to the 401(k) is almost literally the definition of an employee contribution; so that obviously won't work... – quid Apr 11 '18 at 18:12
  • So how are employers managing to do such a large contribution (55K limit). I find it highly unlikely (or extremely rare) that a company exists where every employee get such a large donation. – Ron JES100 Apr 11 '18 at 18:52
  • A multiple match is not unheard of, 3x up to x% of your salary up to the maximum. Though there's the potential for this to fail the high-comp discrimination tests if too many executives are achieving the maximum contribution and non enough employer dollars are received by staff participants. It's certainly more common for the match to be part of the employee contribution (ie 50%) not a multiple of it, but the rules allow a multiple. – quid Apr 11 '18 at 18:58
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Realistically the only companies that could have employees that max out the full 401K contribution limits of $55K are those where nearly all employees are highly compensated, and likely to be owners. This pretty much limits it to small, closely held businesses. I'd guess there are some mid-size companies that have it too, but I suspect they are rare.

Employer 401K contributions are not subject to FICA taxes, so extra 401K contributions in lieu of salary could be considered a tax savings for both the employee and employer, if the employee is willing to not touch that salary for many years.

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