Accounting, Payroll & Pension Issues/Car allowances/401K

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Question
Hi Shirley - May I just pose this question to you a little differently?  if an employee receives a car allowance, which is paid monthly, and designated as separate from "regular wages" - should that car allowance have employee 401k contributions deducted? Can the employer dictate that 401k contributions MUST come from all wages, including monthly car allowance payments?  I'm fairly certain there is no requirement that "all wages" paid must be subject to the 401K contribution level the employee elects for their regular wages. Appreciate your advice.  Karen

Answer
I have been HR for 32 years. I helped to design our 401K plan. We wrote into our plan all wages except severance and bonus checks. The plan is written by either the company or the 401K administrator for the company.  It is than sent to the IRS for review. The plan cannot be changed unless an amendment is done to the plan and it is approved by the IRS. You will have to talk to the person in your company that administers your 401K plan. It can be written in different ways. I have had plans I have worked with that did include all wages. It just depends on how the wording in your plan is written.  Talk to HR, your benefits administrator or your 401K company. They will know what the rules are for your plan. They are not the same for all plans.

Shirley McAllister

Accounting, Payroll & Pension Issues

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Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

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