Why Can’t I Set a Saver Rate Of 100% to Be Deferred Into My 401(k)?

When you set a savings rate at Vestwell, this rate is set up in your company payroll system. This allows you to contribute directly to your 401(k) account from each paycheck - this is often referred to as a “salary deferral” - essentially waiting until later to access your salary. When payroll is processed, 401(k) deferrals (pre-tax and/or Roth) are deducted from your paycheck along with tax withholding and other deductions, and the net amount is paid to you via check or direct deposit.

Before your 401(k) deductions can be taken out of your gross pay, other deductions take priority. These may include Social Security and Medicare taxes, Federal and state income taxes (including on amounts deducted as Roth deferrals), as well as medical premium deductions and State Disability Insurance, such as California SDI. If your gross pay amount for a pay period, less these prioritized deductions, is less than your 401(k) elected savings rate, some payroll systems may fail to process your election - meaning instead of saving close to your chosen rate, your paycheck will reflect 0% in 401(k) savings. 

Note that some payroll providers do have the ability to automatically adjust your pre-tax or Roth deferrals (based on the savings rates communicated to them) to process prioritized deductions first, and process as much of your 401(k) savings rate as possible. 

With an aim to avoid the potential of ignored 401(k) elections, the Vestwell platform limits your savings rate to 90% for pre-tax 401(k) deductions, and 60% for Roth 401(k) deductions, or 75% across both. 

If you are still looking to increase your election settings above the rates described above, please contact us at help@vestwell.com; keep an eye on your payroll deductions to determine if such adjustments work as intended in your payroll. If you have any further questions about withholding and your 401(k) elections, we recommend you check with your payroll provider or tax advisor to inquire more about how your situation and payroll settings may impact your 401(k) withholdings and taxation.

US Department of Commerce page on order of precedence from gross pay: https://www.commerce.gov/hr/practitioners/compensation-policies/general-pay/order-of-precedence-from-gross-pay