True or False: Employers may contribute up to a set percentage of total compensation for all employees in a year.

Employers have the ability to contribute a set percentage of total compensation for all eligible employees to a 401(k) plan each year, which aligns with the retirement plan’s contribution structure. This is often guided by plan provisions or limits set by the Internal Revenue Code, such as the annual contribution limits.

Contributions can be made in various forms, including matching contributions or non-elective contributions, which may apply to all employees based on predetermined criteria. This flexibility allows employers to enhance overall employee retirement savings, promote employee retention, and create a competitive benefits package.

By allowing contributions to be made as a percentage of total compensation rather than only targeting selected employees or new hires, employers ensure that retirement benefits are equitably distributed across their workforce, fostering a culture of inclusivity in employee benefits.