I'm trying to determine a matching contribution formula and limit for my 501©(3) organization's retirement plan. When I called the IRS they told me about the Safe Harbor rule and mentioned that matching 100% of contributions up to 6% of salary is at the upper limits of what most companies do.
If that's the case, how could anyone every reach the $40,000 annual limit? If I contribute $13,000 as an employee and the employer can only match 6%, I'd have to be making $450,000 in order for that 6% limit to hit $27,000 and bring the total to $40,000. Am I missing something?
I'm interested in letting employees contribute as much as they want up to $13,000 and then having the employer match that 100%. Do I need to have a limit on matching based on % of compensation? Can that maximum be 10%? 15%? 20%?
We only have 3 employees and we'd all like to save as much as we can. Since matching also reduces FICA for the employer, I'd like as high a limit as possible.
Thanks for your feedback.