What Are the 401k Plan Limits?

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).

On October 28, 2010 the IRS announced 401k plan limits for tax year 2011. Due to continued low inflation, the most significant 401k plan limits will remain unchanged for the third year in a row.

The table below shows the primary 401k plan limits in effect for tax years 2008 through 2011. Brief descriptions of the various limits are also provided.

Maximum Deferral and Threshold Limits for 2008 – 2011
Limit 2008 2009 2010 2011
Elective Deferral Maximum for 401(k) Plans and 403(b) Plans – IRC § 402(g)(1) $15,500 $16,500 $16,500 $16,500
Elective Deferral Maximum for 457 Plans – IRC § 457(e)(15) – (below note a) 15,500 16,500 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) 5,000 5,500 5,500 5,500
Maximum Contribution to a Qualified Defined Contribution Plan – IRC § 415(c)(1)(A) – (below note c) 46,000 49,000 49,000 49,000
Maximum Compensation Limit – IRC § 401(a)(17) – (below note d) 230,000 245,000 245,000 245,000
Highly Compensated Employee Salary Threshhold – IRC 414(q)(1)(B) 105,000 110,000 110,000 110,000
IRA Contribution Limit 5,000 5,000 5,000 5,000
IRA Catch-Up Limit (Age 50 and Older) – IRC § 219(b)(5)(B)(ii) 1,000 1,000 1,000 1,000
Social Security Maximum Taxable Earnings – OASDI 102,000 106,800 106,800 106,800
  • note a – Elective deferrals are voluntary agreements in which employees elect to forgo current income in return for the employer’s contributions to retirement or other benefit plans. Elective deferrals are available for a variety of tax-qualified retirement plans, including 401(k) plans.
  • note b – 401k plan participants who are or will be age 50 or older by the end of the plan year may voluntarily make additional “catch-up” contributions to the plan, above the maximum elective deferral limits. The maximum catch-up contribution is the lesser of (1) a specific dollar amount (the “catch-up dollar limit”) or (2) the participant’s compensation for the year reduced by any other elective deferrals made during the year.
  • note c – IRS limits the maximum “annual additions” that can be made to a member’s defined contribution plan account to the lesser of $49,000 in 2011, or 100% of annual compensation. In this context, annual additions include employer and employee contributions, as well as forfeitures.
  • note d – IRS limits the amount of compensation that can be taken into account by the plan, for the purpose of determining benefits and contributions, to $245,000 in 2011. For private sector plans, even if a plan member earns more than this amount, only $245,000 may be used in 2011 to calculate employee contributions to, or benefits provided by, the qualified plan.