First of all, congratulations on having a job that provides a bonus for your hard work! Not many people (in any economy) can truthfully say the same.

The simple answer to your question appears to be "yes." The written 401(k) Plan document that states exactly how contributions to the 401(k) can be made do state, among other things, what is the definition of compensation. If the Plan document lists "holiday bonus" or something similar as included in compensation for calculating your 401(k) contribution, then your contributory percentage applies to your regular salary as well as to your end-of-year bonus.

One option that MAY be available to you is to select a straight dollar amount to be contributed to your 401(k) from each regular paycheck (instead of a percentage of your earnings). That way (so long as you are assured of getting some sort of bonus every year) you can determine exactly how much money will be contributed to your 401(k) during the year, without having to worry about a certain percentage being taken out of your entire year's income.

Another option that MIGHT be available in your company's 401(k) plan is the option to elect out of including your bonus in your compensation for purposes of calculating your 401(k) contributions. As of this writing, we have not seen a Plan Document that offers such an 'opt-out' feature.

Please note that these options are not likely to be available with most 401(k) plans, essentially because they could be seen as potentially too administratively costly for the Plan Administrator to have to work with. It is therefore suggested that you have a long, friendly talk with the Plan Administrator/staff about what options the 401(k) Plan document actually allows you to do.

Not all 401(k) Plans are created equal, so the regulations that are in place are meant only to place caps/limits in some areas and protections for lower-earning workers in other places. Checking on your own company's 401(k) Plan documents can yield many unique answers to many otherwise common questions.

*Tax Disclaimer* The above material is not to be construed as a complete analysis of all Tax considerations. The opinion issued should not be used to avoid or evade Taxes, nor should it be relied upon to avoid any proper federal and/or other Tax-related penalties. Accordingly, this material is not intended or written to be used (and a Taxpayer cannot use it) for the purpose of promoting, marketing, and/or recommending to another party any Tax-related matters. Please be aware that Tax laws are subject to change at any time. Consult your trusted independent Tax advisor for the latest information/interpretations of Tax law.