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RESOURCE CENTER
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ANNUAL DOLLAR LIMITS
The table below shows the 2009 and 2010
dollar limitations that affect qualified
plans.
Description
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2009
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2010
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401(k) Deferrals
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$16,500
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$16,500
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401(k) Catch-up
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5,500
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5,500
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SIMPLE Deferrals
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11,500
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11,500
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SIMPLE Catch-up
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2,500
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2,500
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Section 415 Limit
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49,000
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49,000
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Defined Benefit Limit
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195,000
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195,000
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Compensation Limit
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245,000
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245,000
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| HCE
Comp Limit |
110,000
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110,000
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SS
Wage Limit
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106,800
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106,800
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Resource
Center
Plan Contribution Limits
ERISA
requires all qualified retirement plans to comply with limiting the amount of
annual contributions or benefits. Read below to learn more about how much can
be funded to different types of qualified retirement plans.
DEFINED
CONTRIBUTION PLANS
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, which is $245,000 for 2010.
PARTICIPANT-LEVEL LIMITS
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.
Profit Sharing Plans
- No participant can receive annual additions (contributions and forfeitures)
from a profit sharing plan in excess of the IRC §415 Limit of 100% of Salary or
$49,000.
401(k) Plans
- For 2010, no employee can defer more than $16,500 of his own salary into a
401(k) Plan. In addition, no participant can exceed the IRC §415 Limit of 100%
of Salary or $49,000, when considering all contributions (i.e., employee,
employer matching, and profit sharing). Highly Compensated Employees may
also be limited in the amount of salary deferrals and matching contributions,
because of the ADP and ACP Tests. Safe Harbor 401(k) Plans are not
subject to the ADP and ACP Test.
EMPLOYER TAX DEDUCTION LIMITS
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.
DEFINED
BENEFIT PLANS
While defined benefit plans have
a limit on the annual amount that participants receive at retirement age
($195,000 for 2010), there is no statutory limit on the amount that can be
funded to a defined benefit plan each year. Defined Benefit Plans are
required
to fund an annual contribution in an amount to fully pay for all benefits
accrued. This amount is calculated by an actuary each year and depends on
actuarial factors such as plan assets and asset growth, interest rates,
employee ages and turnover, and others. Defined benefit plans can
allow much greater contributions than defined contribution plans.
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