IRS Announces 2010 Contribution Limits
Benefit Plan Limits (2003 – 2010)
The IRS has issued the cost-of-living adjustments for 2010 that affect employee benefit plans. Most 2010 limits applicable to 401k and other plans will remain at their 2009 levels.
There are several “limits” that apply to 401k plans under the Internal Revenue Code (IRC). The limits are found in various sections of the IRC. 401k plans must comply with the various IRC limits to maintain tax-qualified status. The Internal Revenue Service (IRS) annually increases 401k plan limits to reflect changes in the Consumer Price Index (CPI). Often, adjustments are made only if the change in the limit attributable to the CPI exceeds a certain threshold (e.g., $1,000 or $5,000).
The table below shows the primary 401k plan limits in effect for 2010 and 2009. Brief descriptions of the various limits are also provided.
| Maximum Deferral and Threshold Limits for 2009 and 2010 | ||
|---|---|---|
| Limit | 2010 | 2009 |
| Elective Deferral Maximum for 401(k) Plans and 403(b) Plans – IRC § 402(g)(1) | $16,500 | $16,500 |
| Elective Deferral Maximum for 457 Plans – IRC § 457(e)(15) – (below note a) | 16,500 | 16,500 |
| Catch-Up Limit (Age 50 and Older) for 401(k), 403(b), and 457 Plans – IRC § 414(v)(2)(B)(i) | 5,500 | 5,500 |
| Maximum Contribution to a Qualified Defined Contribution Plan – IRC § 415(c)(1)(A) – (below note c) | 49,000 | 49,000 |
| Maximum Compensation Limit – IRC § 401(a)(17) – (below note d) | 245,000 | 245,000 |
| Highly Compensated Employee Salary Threshhold – IRC 414(q)(1)(B) | 110,000 | 110,000 |
| IRA Contribution Limit | 5,000 | 5,000 |
| IRA Catch-Up Limit (Age 50 and Older) – IRC § 219(b)(5)(B)(ii) | 1,000 | 1,000 |
| Social Security Maximum Taxable Earnings – OASDI | 106,800 | 106,800 |
So I’m 58 and wish to catch up so I can contribute up to $22,000 plus an additional $16,500?
The total limit is $22,000. This means that you can contribute your normal limit of $16,500 plus an additional $5,500 to come to a total of $22,000.
We deposit 6% of an employee’s gross earnings in December into their 401K.
Can we give some employees less then 6% while others would receive 6% or more then 6%??
I changed employers in April. I contributed to my previous employer’s 401k until I left to go to my new job. Am I limited to an annual contribution of $16,500 across both plans, or can I contribute up to $16,500 in my new 401k in addition to what I was able to contribute to my former employer’s plan?
The text says that there are NEW 401K limits, but then the chart shows 2009 and 2010 exactly the same. So what’s new?
Very little new. Low inflation and the financial crisis caused regulators to leave things alone for a year.
Tim: no total of $22k.
Hank: matches are typically across the board, per compliance reasons.
Mary: no matter how many 401k you participate in the total amount you can defer per year in all of them is $16,500 if you’re under 50. Total meaning all together. Sorry.
I think that the argument that one shouldn’t borrow money from a 401k because
it is repaid with after-tax dollars is flawed.
For example, suppose one is planning to borrow money for a down payment
on a house, and his choices were to borrow the money from relatives or his
401k. In both cases the money will be repaid with after-tax dollars, so this
observation is irrelevant. The important consideration is that if the money
comes from the 401k, the interest on the loan is repaid to the 401k, but if the
money is borrowed from elsewhere, the interest is lost.
The argument that the 401k will earn less is also bogus – the 401k will earn the interest
on the loan, which is pretty good when compared to the S&P500 for the last ten years.
The bottom line is that, as long as one is going to be able repay the loan, the 401k is
by far and away the best place to borrow money for a major purchase (most plans restrict
borrowing anyhow).
Dan Moyles
Is there a % of Wage limit applied to elective deferrals? If I earn 16500 can I defer 16500?
My company, startIng this year, is no longer making year end true up’s with their matching contribution. They claim to get the most benefit we need to try and stretch out our contribution so that we do not max out before year end. My question relates to the 245,000 limit. If I expect to make over that limit do my contributions stop at 245k or do they companies match stop at 245k or neither. Any help would be appreciated.
Is there a difference in the amount that we can contribute as a married couple? Or is is still 16,500 per person’s paycheck totaling 33,00.00 yearly together?
$16,500 is per person’s paycheck.
401k catch up … can it still be made for the 2010 tax year or does it have to be done before the end of the calendar year?