What Is the Minimum 401k Contribution?
A minimum 401k contribution isn't a fixed amount. It differs for employees seeking a match and employers who may have plan-based funding obligations.
The minimum 401k contribution is not a single number, as the requirements depend on your position as either an employee or an employer. For employees, the discussion centers on personal choice, while for employers, it involves specific plan rules and regulatory compliance. These rules are shaped by individual plan documents, employer policies, and Internal Revenue Service (IRS) regulations that can mandate contributions.
Minimum Contributions for Employees
For most employees, there is no federally mandated minimum amount you must contribute to your 401k plan, and unless your plan has a specific rule, you can contribute nothing. However, for most 401(k) plans established after 2022, federal law mandates automatic enrollment starting in 2025. These plans must automatically enroll eligible employees with an initial contribution rate of at least 3% of their pay. This rate then increases by 1% each year until it reaches at least 10%, but not more than 15%. You always retain the right to change your contribution amount or opt out completely.
The more practical consideration for an employee is not a mandated minimum, but the amount needed to receive the full employer match. An employer match is a common feature where your company contributes a certain amount to your 401k based on your own contributions. Think of this as a component of your overall compensation package; failing to contribute enough to get the full match is like turning down a portion of your pay.
A frequent matching formula is a dollar-for-dollar match on the first 3% to 6% of your salary that you contribute. For example, if your employer offers a 100% match on the first 3% of your compensation, and you earn $60,000, you would need to contribute at least $1,800 to receive the full company match of $1,800. If you contributed less, you would receive a smaller match.
Another common formula is a partial match, such as the employer contributing 50 cents for every dollar you save, up to the first 6% of your pay. Under this scenario with a $60,000 salary, contributing 6% ($3,600) is necessary to maximize the employer’s contribution of $1,800.
Required Employer Contributions
While employer contributions to a standard 401k plan are often discretionary, there are specific circumstances that legally require a company to contribute to its employees’ accounts. These mandates are designed to ensure fairness and prevent plans from disproportionately benefiting high earners. The two primary scenarios that trigger these required contributions are Safe Harbor provisions and Top-Heavy plan rules.
A Safe Harbor 401k plan is a specific plan design that allows an employer to automatically pass certain annual nondiscrimination tests required by the IRS. In exchange for this simplified compliance, the employer must make mandatory, fully vested contributions. The employer generally has two options: a non-elective contribution of at least 3% of compensation to all eligible employees or a matching contribution. The basic matching formula is a 100% match on the first 3% of an employee’s contribution, plus a 50% match on the next 2% of their contribution.
A plan can also become subject to mandatory contributions if it is deemed “Top-Heavy.” A 401k plan is considered Top-Heavy for a plan year if the total value of the accounts for “key employees” exceeds 60% of the total value of all assets in the plan. For 2025, the IRS defines a key employee as an officer of the company earning more than $230,000 or an employee who is either a more-than-5% owner of the business or a more-than-1% owner earning over $150,000. If a plan becomes Top-Heavy, the employer is required to make a minimum contribution to the accounts of all non-key employees.
The required Top-Heavy contribution is the lesser of 3% of the employee’s compensation or the highest contribution rate made for any key employee. For instance, if the highest-contributing key employee defers 10% of their salary, the employer must contribute at least 3% to all non-key employees. If the highest key employee contribution was only 2%, the required employer contribution would be 2%.