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Does the 401(k) max contribution limit include the employer match?


There is a maximum limit on the total yearly employee pre-tax salary deferral. The limit is $17,000 for the year 2012, and $17,500 for the year 2013. Employees who are 50 years old or over at any time during the year are now allowed additional pre-tax “catch up” contributions of up to $5,500 for 2012 and 2013.

For future years, the limit will be indexed for inflation, increasing in increments of $500. In eligible plans, employees can elect to have their contribution allocated as either a pre-tax contribution or as an after tax Roth 401(k) contribution, or a combination of the two. The total of all 401(k) contributions must not exceed the maximum contribution amount.

If the employee contributes more than the maximum pre-tax limit to 401(k) accounts in a given year, the excess must be withdrawn by April 15th of the following year. This violation most commonly occurs when a person switches employers mid-year and the latest employer does not know to enforce the contribution limits on behalf of their employee. If this violation is noticed too late, the employee may have to pay taxes and penalties on the excess. The excess contribution, as well as the earnings on the excess, is considered “non-qualified” and cannot remain in a qualified retirement plan such as a 401(k).

Plans set up under section 401(k) can also have employer contributions that (when added to the employee contributions) cannot exceed other regulatory limits. The total amount that can be contributed between employee and employer contributions is the section 415 limit, which is the lesser of 100% of the employees compensation or $50,000 for 2012 and $51,000 for 2013. Employer matching contributions can be made on behalf of designated Roth contributions, but the employer match must be made on a pre-tax basis.

Update 1: If you’re still confused, read the comments for further clarification.
Update 2: Updated with the limits for 2013.
Update 3: This chart should help:

401k Limits 2013

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Comments

85 Responses to “Does the 401(k) max contribution limit include the employer match?”

  1. Adam on June 15th, 2010 5:06 am

    I wish this answered the question more clearly. You explain what the yearly limit is and what the employer contribution limit is, but not whether the two interact, which was the question you asked in the first place. So I’m still confused about the answer.

  2. Clint on June 17th, 2010 5:05 pm

    Adam, how the two interact is specifically highlighted in bold in the article:

    “The total amount that can be contributed between employee and employer contributions is … the lesser of 100% of the employees compensation or $45,000 for 2007, and $46,000 for 2008.”

    At the time of this writing, the max you could contribute as an individual was $15,500 (update: current limit is $16,500). You employer could add contributions that get the total amount up to the lesser of $45,000 or 100% of your total compensation.

    The original question came from people that knew about the $15,500 limit (update: current limit is $16,500), but didn’t know if that included their employer match contributions. I think the article answers the question, but to be super clear, the answer is that it does not.

  3. confused on September 4th, 2010 3:29 pm

    I still can’t determine the answer from this article. Does the individual get to contribute up to t he limit, or does the individual have to artificially contribute less because the company will match some?

  4. Clint on September 4th, 2010 4:01 pm

    You can contribute a maximum of $15,500 of your own money. That is your limit. $15,500. Your own money. $15,500. Your contribution max. Are we clear on that part? That’s really all you need to worry about.

    Your employer can contribute additional money. Enough to get the total (employer contributions + your contributions) up to $46,000, but the amount that your employer contributes has no effect on the $15,500 you can contribute.

    Once again, to try to be clear, if you add $15,500, and your employer adds an additional $30,500 (as unlikely as that is), you are still within your limits.

  5. Ray T. on September 8th, 2010 10:19 am

    It’s the employer part that’s confusing. I’ve understood for years what the yearly limit on my contribution was, but the employer limit made me go cross-eyed for a LONG time.

    The key is to read the bolded portion of this article slowly. I’d loved to find any employer that would maximize it’s 401k contribution. Basically, an employer would have to give you nearly a 2 to 1 match (1.9696 to be precise using 2010 limits) on ALL of your contributions in order to maximize the employer portion. If anyone knows an employer who does that, I’d like to hear about it. :)

  6. Clint on September 9th, 2010 4:54 pm

    Ray,

    You’re right. The employer part can be a little confusing. But, like you said, I’m not aware of any employers getting close to hitting that max. And, fortunately, it’s not something an employee has to worry about.

    Many employees find out that the max they can contribute to a 401k is $15,500 and then they start to wonder something along the lines of, “If my employer is contributing $5,000, does that mean I can only contribute $10,500 before hitting my limit”.

    I tried to make it clear (apparently unsuccessfully) that the employer’s contributions do not alter the max amount that the employee can contribute.

  7. Ray T. on September 13th, 2010 12:58 pm

    I did a Google search about it after my previous posting. Found some “heard it from a friend who” postings that in 2007 the Boston Consulting Group was actually giving/paying the employer maximum. True? *shrug* But for an upscale company like that, I could believe it was true then, but possibly no longer true due to the down turn in the economy.

    My sister has worked for Intel for about 8 years. When she started they contributed an amount equal to 12% of you pay into the 401k. Not a match, you just got it. Over the years that number has been reduced a couple of times and is now down to 6% if I remember correctly.

    There probably are “upscale” employers (think Goldman, Sachs and the like) who do contribute the employer maximum at least for some employees, high level executives. The sad/amusing part is the people who get it probably feel like the $32,500 is pocket change. They are already getting paid hundreds of thousands of dollars, if not millions.

  8. Sesh on November 6th, 2010 6:29 pm

    Does contribution to a regular or Roth IRA in any way creep in to any of these limits? Or is it $5000 (or 6000 for the 50+) in addition to the 401(k) amounts – both the employee deferral and the bolded total contribution?

  9. Clint on November 6th, 2010 6:53 pm

    IRA limits and 401k limits have nothing to do with the other. And contributions to either have no impact on contributions to the other. Both types of retirement account are independent of the other.

  10. Brian on November 10th, 2010 9:44 am

    Clint, I can see your frustration with this answer, but also see the lingering question by others.
    Have you ever tried to write an instruction manual? While the instructions may seem crystal clear to you, to others it may be extremely confusing. The manuals author understands the material he writes about therefore it seems clear.
    Although you did answer the question in your post on Sept. 4th, 2010 @ 4:01pm, the original article left others (including myself) still confused.
    I do want to thank you for your answer however.

  11. Clint on November 10th, 2010 11:04 am

    Brian, yes, it became very clear to me that I did not answer the question well because my answer left several people confused. I just really didn’t know how to answer it more clearly, which would be a failure on my part.

  12. Cybo on November 22nd, 2010 9:40 pm

    Clint, the reason your answer is confusing, even though they didn’t ask specifically, is that people want to know what the employee contribution max is if their company matches. That match is your money in your account so you can understand that people might want to know this answer if they contribute $7000 and their employee does the same they might think, “uh oh $14000 is getting close to my annual limit.” We didn’t even realize there was an employer match limit but that’s what you chose to focus your answer on. The real question should have been, “Does my employer match count towards the maximum I can contribute to my 401k?” And the answer, “no.” If you really want to explain, “no, your employee match has a separate maximum limit though…”

  13. Clint on November 22nd, 2010 10:02 pm

    Cybo, I wouldn’t say I focused my answer on the employer match limit. It wasn’t even mentioned until the final paragraph. On the other hand, the employee pre-tax salary limit was clearly stated in the first 2 sentences. But, as I’ve admitted, the original answer was obviously confusing.

  14. Dave on December 1st, 2010 12:03 pm

    Is this thread a joke? Maybe I paid too much attention while I read the response, but I don’t know how anyone could miss the message. Keep your head up, Clint.

  15. James on December 7th, 2010 7:31 am

    Clint, would you know or can you direct me to a resource where I can find a chart/table/listing of the employee and employer 401k contributions limits starting with the year 200?

  16. David on December 15th, 2010 4:30 pm

    I was doing good on this thread until I read your response on November 6th, about the Roth and the 401k contributions being completely independant and not effecting each other.
    Earlier in the article you wrote “In eligible plans, employees can elect to have their contribution allocated as either a pre-tax contribution or as an after tax Roth 401(k) contribution, or a combination of the two. The total of all 401(k) contributions must not exceed the maximum contribution amount.”
    I guess the obvious question would be;
    Is there a difference between a Roth IRA and a Roth 401k?
    If yes, then my question is answered.

  17. Clint on December 15th, 2010 4:47 pm

    401ks and IRAs have different contribution limits. So yes, there is a difference between a Roth IRA and a Roth 401k. A Roth 401k has the same contribution limits as a traditional 401k. The difference is that Roth 401k contributions are post-tax as apposed to traditional 401k contributions which are tax-deferred.

  18. Tyler on January 12th, 2011 7:16 pm

    There is one thing I’m still confused about. So an employee can contribute a max of $16,500 a year and it seems like on average employers match up to 4% or around there. So for example if you made $100,000 the employer would put $4000 in so you would be at $20,500. With that being said, what is the point of the total contribution limit being at $49,000 now since most people can’t get close to that anyway even if they invested there max like my example? Is there something Im missing or is it basically impossible to reach the max? Do most people that put there max in only reach around the low $20,000′s range since most employers only match a small percent?

  19. Clint on January 12th, 2011 7:31 pm

    Tyler, you are right. Most employees will never get close to the maximum, but as Ray T. said: “There probably are “upscale” employers (think Goldman, Sachs and the like) who do contribute the employer maximum at least for some employees, high level executives.”

  20. Anna on January 17th, 2011 10:42 am

    My husband’s company says the employer match is added to the employee contribution and together the total cannot exceed the maximum contribution limit. Is it possible that their 401k plan has different rules? There are also many websites that say the two sources are added together. Can you point me a reliable source for your information, like the IRS? My husband can then show it to his employer. Thanks.

  21. Clint on January 17th, 2011 10:46 am

    @Anna

    http://www.irs.gov/retirement/article/0,,id=119625,00.html

    “Contribution Limits

    Total employer and employee contributions to all of an employer’s plans are subject to an overall annual limitation – the lesser of:

    100 percent of the employee’s compensation, or
    $49,000 in 2010 and 2011.
    The amount employees can contribute under a traditional, safe harbor or automatic enrollment 401(k) plan is limited to $16,500 for 2010 and 2011.

    Traditional, safe harbor and automatic enrollment 401(k) plans can allow additional catch-up contributions in the amount of $5,500 for 2010 and 2011 for employees aged 50 and over”

  22. Marc on January 17th, 2011 3:38 pm

    Unless I missed it, nobody has shown how to get to the magic number of $49,000. I own an S Corp and I am an employer and employee. If employees are capped at $16,500 (assume I w-2 myself $16,500 and the employer, me, does a 100% match, that only gets me to $38,500. Even with the catchup provision I don’t get to $49,000.

  23. Clint on January 17th, 2011 4:16 pm

    @Marc

    There’s nothing that says an employer (in this case yourself) can only match up to 100%. What if you match at a rate of 200% or 500%? The matching part is not even required. An employer can simply contribute on behalf of the employee without requiring the employee to do so.

  24. Robb on January 18th, 2011 12:21 pm

    A way a person could get to the $49K amount is what they used to have in the “golden” days called profit sharing or bonuses. Remember those? I believe employees could actually elect to have those but into the 401K. OFF-THE-TOPIC: Contact Delta Airlines about bonuses – For charging me to fly me and my bags…they get bonuses???. I think we should be call them Bag-Bonuses?

  25. Ryan on January 20th, 2011 10:34 am

    You should probably update this article to include the limits for 2011 which is 16,500.

  26. Clint on January 20th, 2011 12:52 pm

    Ryan, good point. I’ve updated the numbers.

  27. Trina on January 24th, 2011 12:47 pm

    This was definately confusing, but only because I kept reading. My husband’s company match’s over 100%, so I was just trying to figure out if we would be over the max for the year if we contributed the maxium. But, if I understand correctly we can contribute $16,500.00 and with what ever his company matches could equal up to $49,000.00 and we would be okay with Unlcle Sam!

  28. Clint on January 24th, 2011 12:49 pm

    Trina, you got it.

  29. Rolf on January 25th, 2011 4:26 pm

    The company I work for has a profit sharing plan with a 401K provision (both standard and Roth). The company contributes $49,000 to the profit sharing plan each year. Now that I am over 50 years old, can I also do a salary deferral of $5,500 to my Roth 401K as the catch-up contribution (in addition to the $49,000 that the company does)?

  30. Robin on January 29th, 2011 6:16 am

    Yes, the pretax amount you contribute plus the post tax amount you contribute (optional) plus employer contribution cannot exceed $49,000. I contribute 16,500 plus 5,500 catch up (both pretax) plus I contribute post tax which varies each year as my salary does too, plus my employer adds pretax dollars and i am very careful to make sure the grand total doesn’t exceed 49,000 and i have to do this before my annual salary reaches 245,000. Then it stops until the next year.

    so the answer is yes the total into your plan form you and the employer cannot exceed 49,000 .

  31. Eileen on January 29th, 2011 3:05 pm

    Do payments for loans against 401K count towards limits? On statement it shows up as a contribution.

  32. jenny on February 14th, 2011 7:40 am

    Do I have any chance to contribute money to the previous year? Such as I contribute $11000 for 2010, still have $5500 to reach the limit , can I contribute it now? Or even for 2009? Thanks!

  33. jenny on February 14th, 2011 8:45 am

    And also, and I get tax return if I make up prior years’ 401k contribution?

  34. Mike on February 25th, 2011 5:49 pm

    Good article and discussion. Just one clarifying point: several are focusing on the 16,500 limit which is only your pre-tax limit. Many companies allow you to also contribute after-tax (as Robin Jan. 29) stated – making it more conceivable to hit the 49K “total” contribution limit. For example at my company, 25% contributions are allowed (pre + post tax) + a 6% employer match. Thus a maximum contributing employee would hit the $49K limit at a salary of $158K (more than I make, but not out of the realm of possibility some day in the future). On a side note – while post-tax 401K contributions used to be considered a bad idea (why saddle yourself with potential penalties and restricted investment choices when you could put this in a regular non-retirement account), they’re now a great way to build a Roth IRA. Conceivably I could contribute 25% of my salary post-tax, and roll this entire amount into a Roth IRA (a significant improvement to the $5K contribution limit).

    One question I didn’t see addressed. Do catch-up contributions allow you to exceed the section 415 total limit by $5K? So when I’m 50 I can have a combined contribution of $54K? Thanks!

  35. Clint on February 25th, 2011 6:06 pm

    Mike, I believe the catch-up limit ($5.5k) is only in addition to the employee elective deferral maximum ($16.5k) and does not affect the total maximum contribution limit ($49k) to a qualified defined contribution plan.

  36. Tony on March 1st, 2011 2:33 pm

    I contributed to employee 401k @ the 15% and reached the limit of 16500 in the month of November. So there was no deduction for 401K from my two paychecks for the month of December, and I lost the employer contribution for the month of December.
    Though it looks to me illogical, does the 401K rules is in line with this situation?

  37. Bun on March 3rd, 2011 1:46 am

    I wanted to see if I was doing the math correctly. I make 100,000k a year. I contribute 16.5% pre tax which will max me out by the end of the year at the cap of 16500. My company matches up to 6% and has a contribution limit of 25% per pay period. First question, is my companies 25% cap both per and post tax. Second, if the answer is yes to question one, can I do 16.5% per and the other 8.5% post, maxing me out to my companies contribution guidelines.

  38. Ravishankar on March 14th, 2011 1:59 pm

    Thanks for the detailed discussion. Some websites note that the employer 401k contribution limit remains at 6% of the employee’s pre-tax salary. I am a bit puzzled that nobody has raised this issue when you talk about the $49,000 limit. May I know when this 6% limit would apply?

  39. Darren on April 18th, 2011 5:39 am

    This information is helpful, however I have found websites that mention the 6% claim that Ravishankar (above) mentioned. Does anyone know why some sites discuss a 6% limit on 401k employer contributions?

  40. Rick on May 23rd, 2011 4:40 pm

    I also have the question in line with Tony’s… about if you max out your employee contribution at $16500 in November. Do you lose the employer match because you’re not contributing the minimum 6% that you need to get the match of 3.5% in my case.

  41. Dan on May 23rd, 2011 8:37 pm

    Sorry. No such thing as a 6% anything in Fed. Regs or Rules. Some companies have their own private rules. Must be the case.
    Remember, the Feds NEVER say anything about a “Match”. That is strictly a private agreement between you and your employer. An employer can contribute between zero and 25% of your pay, their choice. They can base their contribution on a match or partial match or what you contribute, your height, how long you’ve been employed, or just pick a number out of the air. It is all their choice.

  42. Anne on May 24th, 2011 8:42 am

    If an employee makes $250,000 per year and contributes 6% to the 401k plan, how much is she able to contribute for the year? $16,500 or $14,700 (6% of the 2011 compensation limit of $245,000)?

  43. Lyle on May 24th, 2011 12:10 pm

    @anne –

    4 potential contributions to the 401K:
    1 – individuals own contribution limit of $16.5 (pre-tax)
    2 – employer match of up to 25% of your income (pre-tax)
    3 – over 50 years old, $5K (pre-tax)
    4 – after tax employee contributions if the plan allows it.

    The total you can stash in a year in the 401k: $49K

    Should you rollover your 401K plan at a future date (like you change employers), you can have the after-tax contributions rolled to a ROTH IRA, but the pre-tax earnings stay together and you can roll them to a Rollover IRA. Makes things nice and neat for tax purposes. Having after-tax contributions in the 401K lets you build more earnings tax deferred. Later rolling the after-tax amounts to a ROTH lets you do that too in a ROTH which should not be taxed at any point. Fidelity explained this to me yesterday btw.

  44. Bill O. on June 21st, 2011 12:12 pm

    Who’s Unlcle Sam?

  45. huh on June 28th, 2011 11:54 am

    So, does the individual get to contribute up to the limit, or does the individual have to contribute less because the company will match some?

  46. Clint on June 28th, 2011 12:02 pm

    Lol. Yes, the individual gets to contribute up to the $16,500 limit, regardless of the company match.

  47. Charles on July 6th, 2011 6:35 am

    @Rick. Yes, you lose the matching employer contribution for December.

    As former federal employee we had a formula something like employer (Uncle Sam) contributed 1% to Thrift Savings Plan (TSP), which is the government employee equivalent of a 401(k), regardless of employee contribution up to 1%. Then for each 1% additional that the employee contributed, employer contributed an additional 0.5% for the next 3% and 0.25% after that up to a maximum of 5%. In the end, employee contributed 9% to get the maximum matching 5%. If employee maxed out at IRS limit (same as 401(k) limit) before the end of the year, employer did not have anything to match and employee missed the 4% contribution.

    All plans have their own additional rules, but should allow you to adjust the amount you put in over the year. E.g., start the year contributing more so the money will grow longer, and then decrease your contribution to still max the employer side contribution through the end of the year without going over $16,500 on your side. Something to figure out and do while your pile of money sits there…

    Thank you Clint. I could not find this info on IRS website until your post of January 17th, 2011 10:46 am

  48. LP on July 7th, 2011 2:00 pm

    Can you confirm this scenario…

    Say, I put away the max $16,500 into my 401k and my company gives me 10% (which they actually do today).

    The only way for me to reach the $49k limit is for my employer to contribute $32.5k into my 401k. Since the employer contribution is 10%, that means my salary would need to be $325k a year for me to reach the $49k total compensation cap.

    So, if I make more than $325k, I should contribute less of my own money or else I won’t get the benefit from the company contribution. Does that sound right?

  49. LLC Owners on July 12th, 2011 6:10 am

    Is an LLC with Subchapter S election under the same guidelines as “employer” that you describe herein (both my husband and I are salaried employees)? If so, it seems as though my husband, managing partner, can make the determination of contributing the employer portion up to the total of 49 K without suspicion for each of us (only two of us in in the co. right now)? It sounds like the employer portion is not necessarily regulated by IRS (beyond the cap amounts)

    (both of us are over 50 so our individual contribution is 22) 16,500 + 5,500 therefore employer portion for each of us could be 27K. (provided that we each earn at least 158K.

    Conceivabley it seems the company can make the full 49K contribution to each of us even if we elect not to withhold up to 22K each which would not make good financial sense on our part of course.

  50. Chris on July 12th, 2011 9:39 am

    LP,

    The employers payroll service provider will not let you go over the limit. It will stop your contributions once you hit the limit.

  51. Russell on July 18th, 2011 9:53 pm

    LP, if you want the contributions to be Roth designated, then you must defer them from your W-2 Wages. So, you could pay yourself $22,000 and defer 100% of that, and the company could match a portion of this say 5% of your income and/or dole out $27,000 just to be generous (non-match distribution). This works only if you and your husband are the only eligible employees. If there are other employees, found to be eligible, and have not been informed of their right to participate, the IRS would not like that. All employees who are full time workers are eligible and the non-match distribution ($27,000 for you $27k for him) would be distributed to all the employees based on their salaries. This “everyone gets a piece” distribution does not apply to the match portion, which is defined by the nature of how you set up the rules for your 401k.

  52. Steve Sr on August 4th, 2011 5:19 pm

    one other thing – you guys keep saying $15,500 but it is $16,500…what I thought before it was confirmed by reading the article(and incorrect in the comments and uncorrected).

    it is of course off the gross salary before taxes right? like if someone has a gross salary of 50grand they take the 15% you elect as one example before the taxes, but also before you pay helth ins, union fees, dental, life ins, etc, etc?? and then after the 5% employee match comes the same wy as one example of the percenatge?

  53. Steve Sr on August 4th, 2011 10:28 pm

    Guys, I need help…I used to do percentages but I just tonight changed our retirement to dollar amounts to beat the 16,500 limit bit:

    my wife has 24 payperiods per yr and I get paid every 2 weeks so I have 26.

    I did $687 per payperiod for her and $634 per payperiod for me. This yr we’re safe because it is august, and I will need to make sure next yr the limit stays the same or grows for 2012. My question is this: is it too risky to push the envelope like this. I know one payperiod ended jan 2nd 2011 I believe. Is it possible I am not thinking of everything because I am not an expert on this and I will go over some how? I am 100% positive I have 26 payperiods per yr and my wife gets paid twice a month for 24 payperiods. Am I doing somethign wrong??!!

  54. PremixYZ on August 5th, 2011 6:10 pm

    I understand the $49k limit now and the need for the cap of 100% of your annual salary.
    With my own business I can give myself an annual match of $49k and not have any other contribution. Of course I could put the $49k in 401k, put most of my money back into the business and then claim I only paid myself $20k this year. Uncle Sam would not be keen on that so they include that 100% limit. So as long as I pay myself $49k and then do a company match of $49k all is well. Not sure there are any public companies that people work for these days that would match even close to that.

  55. KLF1010 on August 11th, 2011 2:44 pm

    @ Premix (and others)
    My large, 5000+ employee, publicly-traded employer (financial industry) does a 50% match yrs 1-3 of employment, 100% match yrs 4-9, 150% match yrs 10-14, and 200% (!!) match yrs 15+ up to 6% of my salary. So, if I were making $200,000/ yr and worked here 16 years and contributed my $16,500 max, my employer would contribute $24,000 ($200,000 x 6% x 200%). That only puts us at $40,500, so there is room for profit sharing deposits, etc. Just thought I’d throw it out there since everyone seemed to think such a benefits package was some kind of unicorn. Now, let’s see if it lasts another 13 years so I can reap those benefits!

  56. Needhelp on August 18th, 2011 6:23 pm

    Good discussions. I need help. I have a 401K with my employer and it is invested in prudential. With my current rate of contribution, I will exceed the $16.5K by year end (by $2k or so). However, if I lower my %, I would lose the contribution matching I am getting from my employer. What happens if my (own) contribution exceed $16.K? Do I have to fill out other forms to pay the tax on it? Is there a work around so I do not lose the matching ? Please advise. Thank you.

  57. Confusion Reigns on October 7th, 2011 9:51 pm

    Dear Needhelp,

    Depending on the rules of your company’s 401K plan, you may be able to make after-tax contributions to meet the employee contribution percentage. My company allows both pre-tax and after-tax contributions to allow the employee to meet the company match contribution percentage.

    As far as the exceeding the $16.5K, I would think that if you are only allowed pre-tax contributions, the contributions would be stopped by your payroll department once you reach the $16.5K limit. This is how my pre-tax contributions are handled. However, my company allows the pre-tax contribution to change over to after-tax contributions so as to continually meet the company match through to the end of the year and thus maximize the company’s contribution. If you don’t have that option then I would call someone in your payroll or HR department for help.

    My question – what is the maximum 2011 401K contribution limit?

    Nearly all the websites, inlcuding this one, and experts I have asked indicate that the maximum 2011 401K contribution limit is $49,000, which I understand. However, as other people have asked here, does this include the catch-up contributions? I’ve checked the IRS website and am still confused as there seems to be conflicting information:
    http://www.irs.gov/retirement/participant/article/0,,id=211334,00.html
    indicates that “Catch-up contributions are not subject to the above limit.” referring to the $49,000 limit. Which to me, would mean that the total contribution limit for people making the maximum catch-up contribution of $5,500 is $54,500. However:
    http://www.irs.gov/retirement/participant/article/0,,id=151786,00.html
    under the “Additional Limits” subtitle at the bottom of the page, indicates the maximum contribution from all sources (pre-tax, after-tax, employer, is $49,000. Thus an apparent contridiction, at least from where I stand. I even asked the company administering my company’s 401K plan and I got two different answers: $49,000 including catch-up contributions and $54,500 ($49,000 + $5,500 catch-up contribution).

    Maybe the id=211334 webpage came after the id=151786 webpage to clarify this issue?

    Has anyone received an answer to this question directly from the IRS? I tried today, but didn’t have the time to wait on the phone long enough to get to speak to anyone.

    Also, Pub 525 doesn’t go into any detail to clarify the catch-up contribution scenario.

  58. Confusion Reigns on October 7th, 2011 10:21 pm

    For the another resource opining the $54,400 maximum 401K contribution limit for over 50′s see:
    http://ebrworld.com/news/ and select the 2011.pdf link under the “FALL 2010″ title.

  59. Bernadette Russell on October 12th, 2011 8:59 am

    I understand that $49M is the total a person canput into a 401K (which includes the person’s max of $16.5M & the rest from an employer). But what about also putting $5M (or $6M if ofer 50) into an IRA. That would make that person’s total deferred amount $54M. Is that OK?

  60. Clifton on November 24th, 2011 9:12 am

    @Clint

    Ok I have a quick question. First let me say that I am positive this article is explained very well but as I am very young and just learning about 401k’s, I’m a bit ignorant on the subject. Ok, that being said, my question is….

    First, If I have a job (beginning 2012 [new limit: $17,000]) making $8/hr, 40hrs week, this would be $320/wk before taxes. Is it possible to contribute the entire $320/wk for 52 weeks totaling $16,640??? I realize no one would ever do this but I am just curious if this is possible.

    2nd, if my employer states that they match 100% of my contribution (I realize that this may be rare or even nonexistent but hypothetically speaking) would that mean that they would also contribute $320/wk for 52wks totaling an additional $16,640????

    Making my total contribution for the year $16,640 x 2= $33,280????

    Side note: If those were really stupid questions, sorry. I’m only 19 :) And if your wondering, the part of your article that I was a bit confused about is as follows:

    *The TOTAL amount that can be contributed BETWEEN EMPLOYEE AND EMPLOYER CONTRIBUTIONS is the section 415 limit, which is the LESSER of 100% of the employees compensation or $49,000 for 2010 and 2011.

    It’s the “LESSER of 100%” part that I was confused about. Basically, if I am already contributing my entire check, 100% (assuming that’s even possible) and my employer contributes additional monies, the total contribution for the year would in fact be MORE than 100% of my compensation since I already contributed 100%. Since you wrote that it is the LESSER of 100% of the employees TOTAL compensation or $49,000 (2010,2011), I am a bit confused. Sorry.

  61. Clint on November 25th, 2011 6:53 pm

    Clifton,

    It’s a good question. Because your total pre-tax compensation of $16,640 is less than $49,000, $16,640 is the maximum amount that can be contributed to your 401k in the calendar year. To answer the specific questions you asked:

    1. Yes, as long as your plan allows it, you could contribute 100% of your pre-tax earnings to your 401k, but you would be at your limit and not eligible for employer contributions.
    2. In the this scenario your own contributions are reaching your 401k max for the year, so you would not be eligible to receive any of the 100% employer match.

    The best thing to do in this scenario would be to contribute 50% of your pre-tax compensation to your 401k, and receive the matching 50% from your employer. You would reach and the full $16,640 allowed and you would have some money left in the paycheck.

  62. Richard on December 27th, 2011 1:35 pm

    First, excellent information. I do have a couple of questions. I have a wholly owned C corporation, so I’m the employee and the employer. I’m over 50. I calculate as the employee I can contribute $22,000. As the employer I can match the $22,000. A total of $44,000. Well within the limit. So here’s the questions: Is the employer contribution tax deductible from the corporation’s earnings? What type of red flags would this raise with the IRS if the 22,000 represented 90-100% of my salary?

  63. James on December 28th, 2011 8:57 am

    Great discussions. I may have missed this in the other comments, but my question is one of catch-up. I contributed approximately $14K this year and would like to know what options I have to bridge the gap to max out at $16.5K? Can I take out a Roth or are there any options with my employer? I am assuming I will miss out on my employers match at this point?

  64. David on December 29th, 2011 8:16 am

    Great site, Here is what I am looking at. An employee has exceeded the $245K earnings for the current year, yet he has not fully contributed his $16,500 can he continue to contribute to his fund?

  65. Lori Neal on January 25th, 2012 7:45 am

    Why is everything so confusing? I do payroll for a company of about 310 people and we have quite a few heavy earners ans we are constantly having to undergo 401K census’s and make adjustments on what these earners are able to contribute. The owner and general manager both maxed out there personal contributions and we only match 25 percent of the first 4 percent of the employee contributions and I was told to shut off the contribution because they had reached there max and now no one seems to know what that amount should be. If someone contributed 16500.00 wouldn’t that limit be only $660.00? I know we contributed more than that on their behalf.

  66. Chad on February 14th, 2012 9:48 am

    Clint seems like kind of a dick.

  67. Clint on February 14th, 2012 10:01 am

    Didn’t mean to be a dick, just wasn’t sure how to be any clearer.

  68. Chad on February 16th, 2012 2:02 pm

    Really? How about…

    “You can put in $17,000 pre tax, and your employer can match whatever he wants. As long as the two combined are less than $49K, you’re good to go.”

  69. Clint on February 16th, 2012 2:31 pm

    @Chad Unfortunately, while that’s true most of the the time, it’s not always quite that simple. As in the case of Clifton’s post above, his total compensation is $16,640, which means the total that can be contributed by himself and his employer is $16,640, not the $49K that you quoted. Leaving that out of the answer could potentially lead to someone like Clifton making a major mistake.

  70. Claudia on March 28th, 2012 10:27 am

    I kind of agree with Chad. I just needed a yes or no answer, but instead he had to make it as confusing as possible. Just answer the question yes or no and then explain where there might be exception. People try so hard to make thing sound more difficult and make themselves sound smarter than the rest of us that they waste my time. I don’t appreciate that at all.

  71. Maximo on April 13th, 2012 9:09 am

    Leaving aside highly compensated employees and corporations, for the majority of employees, it is pretty simple, so why are you confused?

    401(k) (pre-tax and Roth if you have that option)=$17000 max for 2012. Employer contributions are not included.

    Yes, with going over the max before the end of the year, one can run into issues (especially with profit sharing and bonuses, something I have only run into just this year with a new company), but other than that is is pretty simple. If you still can’t figure it out, then it is in your best interest to sit down with a financial adviser and hash it out.

    The Roth 401(k) is a huge benefit, getting around the “normal” Roth limitations on income and contribution amount (assuming one starts to get into that “highly compensated” salary range). I am figuring out how to take full advantage of mine now with my new company, based upon what I can afford.

  72. Greg on April 25th, 2012 11:32 am

    Got an employer question. Our safe harbor has the 100% employer match up to 3% of employee pay and 50% employer match for the next 2% of employee pay for a maximum 4% employer safe harbor match. The question is this. For whatever reason, we have employees who elect to have a large percentage of their pay go into their 401K. As an employer, our system is set up to match up to 4% of their biweekly salary [as if the employee is making the same contribution every pay]. What happens when the employee reaches their contribution maximums in September? As an employer, we have been doing the safe harbor match based on 4% of their biweekly pay but now, for the last four months of the plan year (calendar year), there will be no more employee contributions. Do we as an employer have to do a “catch up match” to ensure that at the end of the year, the company has matched 4% of the employees pay?

  73. anotherEvilHRlady on June 6th, 2012 1:54 pm

    @Clint – great site….thank you!

    @Chad and Claudia….there are some things in life that simply can’t be Fisher-Priced!

  74. Ender Berett on July 12th, 2012 7:53 am

    Thank you infinitely for the post! I am just wondering if this could effect a solo 401k or not. Can anyone help me out?

  75. freddycouples on November 22nd, 2012 9:54 am

    Clint – you have the patience of Job. Couldn’t have been clearer to anyone who walks standing up

  76. ibanker on January 7th, 2013 1:54 pm

    Clint – Very clear and easy to follow. Some folks(Chad,Claudia) have difficulty understanding anything with more controls then an on/off switch. Thanks for the clear information. And Chad, grow up. Don’t call someone a name because you can’t understand something.

  77. Mahondune on February 25th, 2013 5:14 pm

    Hi Clint, very insightful… i was mislead by an associate into thinking that the $16,500 limit included my portion (13,500) plus the employer match of approximately $3000 and i was capped out for the year. Your answer cleared that up. My question is, i am considered a highly compensated employee and my company sent me a letter that the max i can contribute is 12% of my compensation in 2013 to the plan. Is this standard across all companies or am i getting hosed? thanks!

  78. Clint on February 25th, 2013 9:05 pm

    Mahondune – The rules for highly compensated employees come from the IRS, so all companies have to comply. To ensure that companies extend their 401k plans to low-paid employees, the IRS requires 401k plans to take a discrimination test (the average contributions of highly compensated employees, as a group, cannot exceed the average contributions of nonhighly compensated employees, as a group, by more than about 2 percent). Most companies pass, but some have to refund or restrict highly compensated employee contributions in order to pass the test. The way to increase your limit is to encourage greater 401k participation by nonhighly compensated employees.

  79. Manoj on February 28th, 2013 6:08 pm

    For 2013 there is limit of 17500.
    1. Is it employee contribution limit?

    And then there is limit of 51000. I believe it is total annual limit of contribution to 401K including employer contribution.

    2. My question is: Is employer contribution tax free? Or is it that any contribution from employer which is over and above total contribution of 17500 is considered an post tax income and is taxable?

  80. Brenda on February 28th, 2013 8:20 pm

    The Fisher-Price comment made me snort out loud! Great job Clint – I got it, but continued to read the comments for the humor.

  81. Pan on March 28th, 2013 8:25 pm

    Very well written. English is my second language and I can clearly and fully understand what you have written. Thanks.

  82. karen on May 9th, 2013 3:00 pm

    I think that the answers are confusing because who is this mystical employer that would contribute over 30,000 dollars in one year to an employee’s 401k fund?

    What the frick?

    If there is a cap, why does it matter where the funds are coming from? Can’t the cap just be the cap and then everyone shut up?

  83. Vinny on October 26th, 2013 8:28 am

    I’m unclear myself on how there is this much confusion over this. I landed on this page from a Google search and started reading. Once I understood how it was being explained, I jumped further down and saw a very simple chart that clearly illustrated the answer in black and white. I had the answer to my question in a minute of finding the site. I’m not sure why everyone is so confused over this. I think Clint illustrated the point in detail and also provided a quick and to the point chart with the answer which was easy to comprehend. Thanks Clint.

  84. Ray T. on November 11th, 2013 12:00 pm

    @KLF1010
    Ahh, I wished I worked somewhere with a generous a 401k policy you describe. I would have been getting the 200% contribution match for four years now… that would be sweet. Sadly, I have to settle for a lousy 1 to 1 match for the first 3% of my salary. So weak. And this is a Fortune 500, multinational company, with tens of thousands of employees.

  85. Jennifer on March 21st, 2014 9:41 am

    My employer does an AUTOMATIC 4% salary contribution to all employees of the company, whether the employee contributes or not.

    With that said, and with the Max Compensation issue of $250k (+/- depending on the yr), is the maximum the employer would contribe 4% of $250k or a $10,000 contribution in a given year?

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