Does an employer's unvested 401k match count towards my total contribution limit?

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Blimpy

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My employer offers a 401(k) match, but it doesn’t fully vest until I’ve been with the company for a certain number of years, which I haven’t hit yet. Do those unvested matching contributions count toward my total contribution limit for the year they’re made? If I leave before I’m vested, I lose the match entirely.

I’m planning to contribute the maximum this year and next, but I want to avoid any penalties for exceeding the limit if I should be including the unvested match.

If they don’t count now, would they count later in the year they actually vest, since that’s when I technically ‘earn’ them?
 
No, employer matching contributions aren’t included in your personal contribution limit. The IRS only refers to the limit on what you contribute yourself.
 
If you’re referring to total contributions (Employee + Employer match) or the age-based catch-up contribution limits for 2024 ($66,000 or $73,500), both the invested and vested portions of the employer match are included in the total annual limit. These limits are based on the year the contributions are made, regardless of whether the employer match is fully vested or not.

check out https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits#:~:text=100% of the participant's compensation,including catch-up contributions
 
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Dotix75 said:
No, employer matching contributions aren’t included in your personal contribution limit. The IRS only refers to the limit on what you contribute yourself.
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Thanks for clarifying. So if I contribute $61,000 total—split as $20,500 pre-tax and $40,500 post-tax with an immediate Roth in-plan conversion—and my employer adds a $3,000 match, that’s okay? Good to know! I’ve been struggling to find a clear answer on this.

For 2025, the total limit is $66,000, so I’m adjusting my deferrals accordingly.
 
HobGritty said:
If you're referring to the total contribution limits (which include both employee contributions and employer matches) or the catch-up limits (now $66,000 or $73,500 for 2024), then yes, the employer match—whether vested or not—does count toward the annual total. The timing and year the contributions are made determine how they apply, regardless of whether the match is fully vested or not.

check out https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits#:~:text=100% of the participant's compensation,including catch-up contributions
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I’m referring to the total contribution limit for 2024, which is $66,000. I’m not old enough to qualify for catch-up contributions yet.

Just to clarify—did you mean ‘unvested’ when you said ‘invested’? My employer’s matching contributions aren’t vested yet. Do those still count toward the $66,000 limit for 2024? I’ve been factoring them in to be cautious, but if they don’t count, I’d prefer to increase my personal contributions.
 
Blimpy said:
I’m referring to the total contribution limit for 2024, which is $66,000. I’m not old enough to qualify for catch-up contributions yet.

Just to clarify—did you mean ‘unvested’ when you said ‘invested’? My employer’s matching contributions aren’t vested yet. Do those still count toward the $66,000 limit for 2024? I’ve been factoring them in to be cautious, but if they don’t count, I’d prefer to increase my personal contributions.
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Annual contribution limits are determined by the year in which the contributions and employer match are made, regardless of whether the employer match is fully vested or not.
 
Correct.

Let me put it this way: For the $66k limit in 2024, do unvested employer match contributions count towards the total?

If I left on January 1, 2024, I’d lose the matching contributions they accounted for in 2023, so I’m not sure if those should be included in the $66k limit.
 
I think they probably won't appear on your W2 this year, so you won’t be able to report them yet. Most likely, they’ll show up on your W2 in the year you actually get the money. It might be a good idea to check with your payroll team to be sure.
Blimpy said:
Correct.

Let me put it this way: For the $66k limit in 2024, do unvested employer match contributions count towards the total?

If I left on January 1, 2024, I’d lose the matching contributions they accounted for in 2023, so I’m not sure if those should be included in the $66k limit.
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Zulba61 said:
I think they probably won't appear on your W2 this year, so you won’t be able to report them yet. Most likely, they’ll show up on your W2 in the year you actually get the money. It might be a good idea to check with your payroll team to be sure.
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I’d agree with you, but HR isn’t exactly our area of expertise. :)

It gets a bit trickier for me since I have both a full-time and part-time job, and both match 401k contributions, so I’m keeping track of everything in Excel.

Here’s what it looks like for the year, combining both plans:

  • Pre-Tax Contributions: $20,337.69 (The limit is $20,500, and this only includes the payroll deducted contributions.)
  • Employer Match: $3,955.18 (I’m tracking this separately since it doesn’t count toward the $20.5k limit.)
  • After-Tax Contributions (MBR): $36,685.37 (This is the amount I convert from after-tax 401k to Roth 401k each pay period.)
  • My Total Contributions: $57,023.06 (This doesn’t include the employer match, just my contributions.)
  • Total Contributions: $60,978.24 (This is the total, including the unvested match. The cap is $61,000.)
If the unvested employer match counts toward the limit, I’ll be about $4k over and will need to talk to payroll in January to sort out the excess deferral and avoid the 10% penalty.
 
Blimpy said:
I’d agree with you, but HR isn’t exactly our area of expertise. :)
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In addition to what’s been said, my wife also has employer contributions with a vesting schedule similar to yours. I don’t remember seeing anything on her W2 that would let us report the unvested contributions. We’re nowhere near the overall limit, so I haven’t paid much attention, but I haven’t noticed these unvested contributions documented anywhere. My guess is that they’ll appear on the W2 when they’re actually paid out, not when they’re earned.
 
Thanks, that’s super helpful. This is my first employer with a vesting period for the 401k match.
Zulba61 said:
In addition to what’s been said, my wife also has employer contributions with a vesting schedule similar to yours. I don’t remember seeing anything on her W2 that would let us report the unvested contributions. We’re nowhere near the overall limit, so I haven’t paid much attention, but I haven’t noticed these unvested contributions documented anywhere. My guess is that they’ll appear on the W2 when they’re actually paid out, not when they’re earned.
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Blimpy said:
Thanks for clarifying. So if I contribute $61,000 total—split as $20,500 pre-tax and $40,500 post-tax with an immediate Roth in-plan conversion—and my employer adds a $3,000 match, that’s okay? Good to know! I’ve been struggling to find a clear answer on this.

For 2025, the total limit is $66,000, so I’m adjusting my deferrals accordingly.
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The quoted post is incorrect about the $66K limit—it does include employer contributions. Vesting doesn’t matter; what counts is what the employer actually contributed. Even if you're going to "lose" unvested contributions, your company's payroll system is probably designed to stop you from exceeding the limit.
 
Clorp_22 said:
The quoted post is incorrect about the $66K limit—it does include employer contributions. Vesting doesn’t matter; what counts is what the employer actually contributed. Even if you're going to "lose" unvested contributions, your company's payroll system is probably designed to stop you from exceeding the limit.
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Thanks! I can see the match amount in my 401k provider's system (Fidelity).

I was actually typing another comment when you replied. I have two jobs, so two 401k accounts with separate matches. The second job is part-time, so the match is pretty small (8%) and doesn't vest. My full-time job has a smaller match, but I need to wait a few years for it to vest.
 
You mentioned two plans, but the $66k limit applies per employer or controlled group, not the total of all your plans combined.
 
This is a non-issue. Whether contributions are vested or not doesn't affect the 401k annual limits. What matters is when the contributions or matches are made, as those count toward that year's contribution limits.
 
The employee elective deferral limit for 2024 is $22,500 across all 401k plans.

The overall contribution limit applies to each individual 401k plan (unless you're part of a controlled group). For 2024, the total contribution limit is the lesser of $66,000 or your eligible compensation. So, for your very part-time job, the overall contribution limit could be less than $66,000.
Blimpy said:
Thanks! I can see the match amount in my 401k provider's system (Fidelity).

I was actually typing another comment when you replied. I have two jobs, so two 401k accounts with separate matches. The second job is part-time, so the match is pretty small (8%) and doesn't vest. My full-time job has a smaller match, but I need to wait a few years for it to vest.
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Vesting doesn't affect the limit. The employer match counts toward the total $66,000 contribution limit for 2024, whether it’s vested or not. This means your limit includes both your contributions and all employer contributions, up to $66,000.
 
Basically, the OP doesn't need to keep track of the employer match separately for each job.
YoinkSnap said:
The employee elective deferral limit for 2024 is $22,500 across all 401k plans.

The overall contribution limit applies to each individual 401k plan (unless you're part of a controlled group). For 2024, the total contribution limit is the lesser of $66,000 or your eligible compensation. So, for your very part-time job, the overall contribution limit could be less than $66,000.
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To clarify, the situation is straightforward: employer matching contributions, whether vested or unvested, count toward the $66,000 contribution limit for 2024 in the year the match is made.
 
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