Question

A firm pays its 401k participants a combined $22,000,000 in salary/compensation in 2019. What is the...

A firm pays its 401k participants a combined $22,000,000 in salary/compensation in 2019. What is the maximum amount of 401k matching contributions the firm can make in 2019?

$22,000,000

$25,000

$11,000,000

$5,500,000
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Answer #1
The maximum of total contributions (employee+employer) to a 401(k) in 2019
is $56000 or 100% of the salary depending on whichever is less.
The maximum contribution of each employee to the 401(k) is $19000.
Lets assume that each employee has an average salary of $100000.
The employee can contribute $19000, and the employer can contribute
$37000 per employee.
If there are 220 employees, and the employer contributes $37000 per employee.
Then the total contribution from the employer will be $8140000.
The maximum amount of 401(k) matching contributions the firm can make in 2019 is:
$5500000.
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