Does 401k Max Include Employer Contribution? The answer is No. The 401k max limit is the maximum amount that an employee can contribute to their 401k plan. It does not include the amount that the employer may contribute. The employer contribution is a separate amount that the employer may choose to contribute to the employee’s 401k plan. The employer contribution is not included in the 401k max limit.
Employee Contribution Limit
The maximum amount that an employee can contribute to their 401(k) plan in 2023 is $22,500. This limit is set by the Internal Revenue Service (IRS) and applies to both traditional and Roth 401(k) plans.
In addition to the employee contribution limit, employers may also make contributions to their employees’ 401(k) plans. These employer contributions are not included in the employee contribution limit. This means that the total amount that an employee can save in their 401(k) plan, including both employee and employer contributions, can be higher than the employee contribution limit.
The following table shows the employee contribution limits and employer contribution limits for 401(k) plans in 2023:
| Employee Contribution Limit | Employer Contribution Limit |
|---|---|
| $22,500 | 100% of employee compensation, up to a maximum of $66,000 ($73,500 including catch-up contributions) |
401k Max Contribution Limits: Including Employer Match
The maximum amount you can contribute to your 401(k) plan is set by the IRS and is subject to annual adjustments. For 2023, the contribution limit is $22,500 (up from $20,500 in 2022). If you are over the age of 50, you can make an additional catch-up contribution of $7,500 (up from $6,500 in 2022).
Employer Match Limit
In addition to your own contributions, your employer may also contribute to your 401(k) plan. These employer contributions are known as matching contributions. The maximum amount your employer can match is limited to 100% of your contributions, up to a maximum of 25% of your compensation. For example, if you contribute 6% of your salary to your 401(k) plan, your employer could match up to 6% of your salary.
It’s important to note that the 25% limit applies to all employer contributions, including matching contributions and profit-sharing contributions. Therefore, if your employer makes profit-sharing contributions, the amount of matching contributions they can make may be reduced.
| Employee Contribution | Employer Match Limit |
|---|---|
| 6% | 6% |
| 10% | 10% |
| 15% | 15% |
| 20% | 20% |
| 25% | 25% |
Contribution Limits for High-Income Earners
For high-income earners, the 401(k) contribution limit is subject to additional limits. If your annual income exceeds a certain threshold, your contribution limit may be reduced.
- For 2023, the annual contribution limit for individuals under age 50 is $22,500. For individuals age 50 and older, the limit increases to $30,000.
- If your annual income exceeds $265,000 (or $315,000 for joint filers), your contribution limit may be reduced.
The reduced contribution limit is calculated as follows:
- Subtract your annual income from the applicable income threshold.
- Multiply the result by the applicable percentage (20% for individuals under age 50, 25% for individuals age 50 and older).
The following table shows the reduced contribution limits for high-income earners:
| Income | Age Under 50 | Age 50 and Older |
|---|---|---|
| $265,000-$280,000 | $22,500-$20,000 | $30,000-$26,250 |
| $280,000-$295,000 | $20,000-$17,500 | $26,250-$22,500 |
| $295,000 and above | $17,500 | $22,500 |
401k Contribution Limits: Does it Include Employer Contributions?
The maximum amount you can contribute to a 401(k) plan is set by the Internal Revenue Service (IRS) each year. For 2023, the contribution limit is $22,500. This limit applies to employee contributions only and does not include any employer matching contributions.
Annual Catch-up Contributions for Older Workers
Individuals aged 50 and older are eligible to make catch-up contributions to their 401(k) plans. The catch-up contribution limit for 2023 is $7,500.
| Age | Contribution Limit |
|---|---|
| Under 50 | $22,500 |
| 50 and older | $22,500 + $7,500 catch-up contribution |
It’s important to note that catch-up contributions are included in the overall 401(k) contribution limit. This means that if you contribute the maximum amount to your 401(k) plan, including the catch-up contribution, your total contributions cannot exceed $30,000 for 2023.
Employer matching contributions do not count towards the 401(k) contribution limit. This means that you can contribute the maximum amount to your 401(k) plan and still receive employer matching contributions.
Alright, folks, that’s the scoop on whether that 401k max includes your employer’s dough or not. Remember, it’s always a good idea to consult with your friendly neighborhood HR team or a financial advisor to make sure you’re making the most of your retirement savings. Thanks for sticking with me and soaking up the knowledge. If you have any more burning questions, don’t hesitate to drop by again. I’m always happy to dish out the money-saving wisdom.