401(k) and Profit-Sharing Plans Contribution Limits
There are two annual limits that apply to 401(k) and Profit-Sharing Plan contributions, including:
- A limit on employee elective deferrals
- An overall limit on contributions to a plan including the total of all employee elective deferrals, employer contributions and any forfeiture allocations
What Are the Deferral Limits for 401(k) Plans?
The limit for traditional and safe harbor employee elective deferral plans is $18,000 in 2015 and 2016. Keep in mind that this $18,000 amount may be increased in future years due to cost-of-living adjustments.
What Are the Deferral Limits for a SIMPLE 401(k) Plan?
A SIMPLE 401(k) plan limit on employee elective deferrals is $12,500 in 2015 and 2016. This amount may increase in the future due to cost-of-living adjustments
Are There Plan-Based Restrictions on Elective Deferrals?
Yes, there can be restrictions on elective deferrals. These restrictions can further reduce the maximum allowable elective deferrals if:
- Your plan's terms impose a lower limit on elective deferrals
- You are a manager, owner or highly compensated employee and need to limit your elective deferrals to pass nondiscrimination tests
Can I Make Catch-up Contributions If I Am Age 50 or Older?
If your 401(k) plan allows catch up contributions for those age 50 or over, you may make them. However, like normal contributions, there are yearly contribution amount limits:
- $6,000 in 2015 and 2016 to traditional and safe harbor 401(k) plans
- $3,000 in 2015 and 2016 to SIMPLE 401(k) plans
Like other plan contribution limits, the above amounts may increase in future due to cost-of-living adjustments. It is also important to note that you do not need to be behind in your plan contributions to be eligible to make additional elective deferrals, or “catch up” payments, if you meet the other requirements.