Maximum 401k plan contributions and how soon they should be credited

The 401k plan is an account in which you can save monthly contributions, which will eventually accumulate into a lump sum, that you can make use of when you retire. The amount of money that you save will be then invested in various funds, to make the best possible growth.

The amount of money that you contribute in your 401k plan is not the same for everyone, and there is a maximum amount. The maximum amount of money that you can save, or defer, actually changes every year. In 2005 for example, the limit was $14,000. In 2006 it went up to $15,000, and from that year on it will increase by $500 yearly.

When it comes to how quickly your contributions, have to be allocated to your 401k plan by your employer, there are various government regulations. These regulations basically say that the contributions made by employees into their 401k plans, should be made at the earliest day possible. These also state that in no event, should these monthly payments be credited into the 401k plans, after the 15th day of the month, following which the contribution has been paid by the employee.

This means that for no reason should the payments be allocated after the 15th. The employer cannot however, wait until the 15th day of the month, to allocate the payments. If there is a possibility that the funds go in after only two days, then the employers should do the transfers immediately. This rule is here to protect participants and not for employers to abuse, and leave the surplus funds to be shown in their books.

Reference: http://www.401khelpcenter.com/faq/faq_main.html