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Ask Bob: Can I Make a Lump-Sum Contribution to My 401(k)?

Whether a plan participant can make a lump-sum contribution to their 401(k) before the end of the year depends on the provisions of the 401(k) plan, says Denise Appleby, the CEO of Appleby Retirement Consulting.

Question

If I didn't contribute to a 401(k) during 2021, but was eligible to do so, can I do a lump sum contribution? Does it have to be before the end of the year?

Answer

It depends on the provisions of the 401(k) plan, says Denise Appleby, the CEO of Appleby Retirement Consulting.

“A key determining factor is whether the terms of the 401(k) plan allow you to make a salary deferral election now,” she says. “Generally, the election is made during your enrollment period. Some plans do provide multiple windows during the year, and some provide only one window.”

If you are eligible to make a deferral election now, how much you are eligible to defer is determined by the terms of the arrangement, says Appleby. “Generally, salary deferral contributions are based on a percentage of salary,” she says.

For example, the salary deferral election form provided by your employer might require that you elect to contribute up to 100% of your compensation or a dollar amount. Either would be capped at a total of $19,500 for the year 2021. In some cases, the percentage is less than 100.

Some plans, says Appleby, will also allow you to make catch-up contributions of up to $6,500 if you are at least age 50 by the end of the year.

To get the answer that applies to your 401(k) account, Appleby says you will need to check with your plan administrator or human resources department. Your plan administrator or human resources department should be able to let you know whether you are eligible to make the salary deferral election now, and if so, whether there is a cap on how much you can defer per pay period. This would determine how much you are eligible to contribute as salary deferral contributions from now to the end of the year.

Got questions? Get answers!

Email Robert.Powell@maven.io

Question

If I didn't contribute to a 401(k) during 2021, but was eligible to do so, can I do a lump sum contribution? Does it have to be before the end of the year?

Answer

It depends on the provisions of the 401(k) plan, says Denise Appleby, the CEO of Appleby Retirement Consulting.

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