Company Can Match 401(k) at End of Year

Q My wife’s company recently upgraded its 401(k) program to include a 50% match of each employee’s contribution, up to 2% of the individual’s gross salary.

But the company won’t pay the matching amount until Jan. 1, 2001, which means participants won’t earn interest on the matching amount for a year.

The employee also forfeits the company’s contribution if he or she leaves during the year for any reason, including retirement, according to the company’s written policy.

Since the company is required to provide the matching moneys progressively, it is making money on contributions invested on behalf of the employees.

Is this legal?

--R.B., Huntington Beach

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A The law does not require an employer to make matching contributions during this year. Your employer’s plan could include such a requirement, but because that would be unusual, I’ll assume that the plan does not require periodic contributions during the year.

If the plan does have such a requirement, the employer could legally amend the plan to remove an obligation to make contributions throughout the year so that it could provide the matching contribution after the end of the year.

If the employer so delayed the timing of its contributions, it would clearly get the use of those funds until they are contributed to the plan.

--Kirk F. Maldonado

Employee benefits attorney

Riordan & McKinzie

If you have a question about an on-the-job situation, please mail it to Shop Talk, Los Angeles Times, P.O. Box 2008, Costa Mesa, CA 92626; dictate it to (714) 966-7873, or e-mail it to [email protected]. Include your initials and hometown. The Shop Talk column is designed to answer questions of general interest. It should not be construed as legal advice.