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401K - employer contribution only

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rated:
Good morning...

I do not contribute a percentage to my 401K plan for employer matching.

However, I work for a smaller size company, and as a perk to me they've opted to contribute 3% to my 401k account as if I were also putting a 3% payroll deduction into it (which I'm not)

I'm assuming that I report this sum of money in the same way I would on my Federal taxes, since it's technically 'my' money it's just not a matching contribution in the traditional sense

It's an unusual situation, so I thought I'd ask.

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rated:
It isn't that unusual. But you don't report it as income because it's pre-tax. When you actually are able to touch the money, it would be taxable.

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FYI, your company isn't only doing this to be nice, but it helps to satisfy the IRS “safe harbor” rule. This allows more tax-advantageous distributions to the top, and allows business owners to maximize contributions to the plan.

In any event, the money will go into a pre-tax 401k, so it won't effect the taxes you pay. The money will be taxed when you take it out, either at retirement or before (likely with a penalty).

rated:
Thank you for the input. I likely had it confused an IRA or other type of account that is not pre-tax.

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Logan71 said:   Thank you for the input. I likely had it confused an IRA or other type of account that is not pre-tax.
  
IRA is also pre-tax. Only 'roth' accounts are post tax.

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In most cases, traditional IRA are tax deductible, not pre-tax. With pre-tax meaning the amount has already been subtracted from the wages amount shown on your W2.

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jsssm said:   Only 'roth' accounts are post tax.After-tax 401(k) is not 'Roth' but contributions are post tax...

kb2120 said:   In most cases, traditional IRA are tax deductible, not pre-tax. With pre-tax meaning the amount has already been subtracted from the wages amount shown on your W2.While your second sentence may be correct when talking about your first sentence, it's not correct in OP's situation -- employer match is not subtracted from wages. It is not reflected on the W-2 in any way, shape, or form. Employee contributions are subject to payroll tax (= FICA = Soc Sec + Medicare) and are subtracted from wages in box 1, but added back for boxes 3 (up to the limit) and 5.

For OP's employer match, pre-tax just means the amount will be subject to income taxes at withdrawal. More info here

rated:
Your employer reports it on your W2...  Code "D" in box 12A.
scripta said:   
jsssm said:   Only 'roth' accounts are post tax.
After-tax 401(k) is not 'Roth' but contributions are post tax...

  Yes they are Roth...
http://www.investopedia.com/terms/r/roth401k.asp
 

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EradicateSpam said:   Your employer reports it on your W2...  Code "D" in box 12A.
scripta said:   
jsssm said:   Only 'roth' accounts are post tax.
After-tax 401(k) is not 'Roth' but contributions are post tax...

  Yes they are Roth...
http://www.investopedia.com/terms/r/roth401k.asp 

  um...no, they are not.  There indeed are Roth 401k's, and those contributions are post tax.  There is also a different type, post-tax 401k's contributions that are NOT Roth 401k, and those are, well, post tax...
Roth 401ks are subject to the annual $18k/$24k employee contribution limit.  NON ROTH post tax 401k contributions kick in after the $18k/$24k thresholds, and are only allowed in certain select plans.  Their main use is a way to "backdoor" Roth money...
http://news.morningstar.com/articlenet/article.aspx?id=682209
 

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EradicateSpam said:   Your employer reports it on your W2...  Code "D" in box 12A.I'm not sure what this was in response to, but code D in box 12A is for employee contributions, so yes, this is another place where they appear. Employer match is not on the W-2.

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Report what is on your W-2 if anything. That is all you are required to do. Short of that keep good records of expected and actual deposits to your retirement account reconcile it with statements. Its your money for later in life.

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I would actually be upset they do this. If their match is being counted towards the $18k limit you can contribute, it means I can't contribute as much to my 401k. I typically max out my 401k every year.

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avalon6 said:   I would actually be upset they do this. If their match is being counted towards the $18k limit you can contribute, it means I can't contribute as much to my 401k. I typically max out my 401k every year.
  It doesn't count towards the $18k employee contribution limit.  Guess some people will be upset about anything.  Plus it's not a match, it's not matching anything.

An automatic employer contribution % without a "match" is the only fair way to do employer contributions.  Matches are stupid and should be outlawed.  They just get the employer out of paying everyone equally who is paid the same salary/wages.  And the "match" is most damaging to the employees who are stupidest, as they're the ones who won't be making the required employee contribution to make the match.

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Bend3r said:   
avalon6 said:   I would actually be upset they do this. If their match is being counted towards the $18k limit you can contribute, it means I can't contribute as much to my 401k. I typically max out my 401k every year.
  It doesn't count towards the $18k employee contribution limit.  Guess some people will be upset about anything.  Plus it's not a match, it's not matching anything.

An automatic employer contribution % without a "match" is the only fair way to do employer contributions.  Matches are stupid and should be outlawed.  They just get the employer out of paying everyone equally who is paid the same salary/wages.  And the "match" is most damaging to the employees who are stupidest, as they're the ones who won't be making the required employee contribution to make the match.

  
OP made it sound like this was a special case where there were mandatory 401(k) contributions, which would count towards the $18k limit. 

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Bend3r said:   
And the "match" is most damaging to the employees who are stupidest, as they're the ones who won't be making the required employee contribution to make the match.

  Sounds like a good way to make smart employees happy, then.

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I didn't see this thread originally, but since BrianGa just bumped it...

OP, since you were unaware that this was pre-tax, perhaps you were also unaware that your contributions would also be pre-tax and would decrease your taxable income. Depending on the tax bracket you're in, this could be a pretty significant tax savings. I personally max out my annual 401k contributions.

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