Go to Jeff Salisbury LWGate Home Page.From: Rich Carreiro <rlcarr@animato.arlington.ma.us>
Subject: Re: 401(k) limits
Date: Tue, 11 Jan 2000 08:20:15 -0500
Next Article (by Subject): RE: 401-K Limits "Harold R. Justice"
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>What are the limits for 401K contributions? There is >a flat dollar and a percentage, correct? Does this >vary by employer? For 2000, the absolute hard limit is $10,500 (up from $10,000 in 1999). This is set by law. Only your own 401(k) contributions count toward this limit. Then there is a law that says that no more than 25% of your compensation can be tax-deferred. Tax-deferred compensation here includes your contributions, the employer match, employer contributions to a profit-sharing plan and a few other things. Those things cannot exceed 25% of your gross salary (I may be misremembering the rule slightly, but it gives you the idea). Next, if you are a "highly compensated employee" (which means your employer pays you over $80,000), your can have a (sometimes drastically) lower limit imposed on you because of discrimination tests. Qualified retirement plan laws say that HCEs as a group can only account for a certain percentage of all contributions made to the 401(k). So if non-HCEs don't contribute enough, the contributions of the HCEs are forcibly scaled back so the test can be met. Finally, lots of 401(k) plans for some reason (ask your employer) simply set their own limit lower than any of the ones set by law. Rich Carreiro rlcarr@animato.arlington.ma.us - -
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