ERISA requires all qualified retirement plans to limit the amount of annual contributions or benefits. See the chart and details below to learn more about how much can be funded to different types of qualified retirement plans.
|Retirement Plan Limits|
|401(k) Catch-up Contributions||$6,000||$6,000||$6,000||$5,500||$5,500|
|Defined Contribution Limit||$54,000||$53,000||$53,000||$52,000||$51,000|
|Defined Benefit Limit||$215,000||$210,000||$210,000||$210,000||$205,000|
|Highly Compensated Employees||$120,000||$120,000||$120,000||$115,000||$115,000|
|403(b) / 457 Deferrals||$18,000||$18,000||$18,000||$17,500||$17,500|
|SIMPLE Catch-up Contributions||$3,000||$3,000||$3,000||$2,500||$2,500|
|SEP Minimum Compensation||$600||$600||$600||$550||$550|
|Social Security Wage Base||$127,200||$118,500||$118,500||$117,000||$113,700|
Defined Contribution Plans, such as profit-sharing and 401(k) plans, contain limits on the amount of annual contributions that can be funded to the plan. These include both participant and plan-wide limits. In determining contributions, employers must exclude salary above the annual Compensation Limit as shown in the chart above.
Participants in defined contribution plans are subject to several specific limits on how much can be allocated to their individual retirement accounts. These limits are indexed annually for inflation.
Employers are limited in the amount they can contribute to qualified plans. Employers may claim a tax deduction for contributions (either matching or profit sharing contributions) of up to 25% of eligible payroll. Employee Salary Deferral Contributions are not subject to this limit, and can be claimed as an additional tax deduction by the employer.
Happy New Year! To start the year off right, we would like to share insights on how you can help your business-owner clients minimize pains associated with top-heavy issues. Because top-heavy required employer contributions to 401(k) plans can create budget challenges and may be a thorn in the side of some business owners, this article discusses creative ways to alleviate related frustrations, satisfy existing clients and gain new relationships along the way.[+] Learn more
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