When calculating the annual 401(k) contribution limit, it’s important to understand whether or not employer matching contributions count towards this limit. The answer is yes, employer matching contributions do count towards the limit. This means that the total amount you can contribute to your 401(k) plan, including both your own contributions and any matching contributions from your employer, cannot exceed the annual limit set by the IRS. For 2023, the 401(k) contribution limit is $22,500, with an additional catch-up contribution limit of $7,500 for individuals age 50 or older. It’s essential to stay within these limits to avoid potential penalties or taxes on excess contributions.
Deductible Employee Contribution Limit
The deductible employee contribution limit for 401(k) plans is the maximum amount of money that an employee can contribute to their 401(k) account on a pre-tax basis each year. For 2023, the deductible employee contribution limit is $22,500 (up from $20,500 in 2022). This limit applies to both traditional and Roth 401(k) plans.
In addition to the deductible employee contribution limit, there is also an overall contribution limit for 401(k) plans. This limit includes both employee contributions and employer matching contributions. For 2023, the overall contribution limit is $66,000 (up from $61,000 in 2022). This limit applies to both traditional and Roth 401(k) plans.
It is important to note that the deductible employee contribution limit and the overall contribution limit are two separate limits. An employee can contribute up to the deductible employee contribution limit on a pre-tax basis, but they cannot contribute more than the overall contribution limit, including both employee and employer contributions.
Employer Matching Contributions
Employer matching contributions are contributions that an employer makes to an employee’s 401(k) account on the employee’s behalf. Employer matching contributions are not included in the deductible employee contribution limit. However, they are included in the overall contribution limit.
The amount of employer matching contributions that an employee receives depends on the terms of their employer’s 401(k) plan. Some plans match employee contributions dollar-for-dollar, while others match a percentage of employee contributions. The maximum amount of employer matching contributions that an employee can receive is $61,000 for 2023.
Table: 401(k) Contribution Limits for 2023
| Type of Contribution | Limit |
|---|---|
| Deductible Employee Contribution | $22,500 |
| Overall Contribution (including employer match) | $66,000 |
| Employer Matching Contribution | $61,000 |
Statutory 401k Limit
The statutory 401k contribution limit refers to the maximum amount of money that an individual can contribute to a 401k plan each year, as set by the Internal Revenue Service (IRS). This limit applies to both employee and employer contributions, but it does not include any employer matching contributions.
For 2023, the statutory 401k contribution limit is $22,500. This limit applies to both traditional 401k plans and Roth 401k plans.
Employer Matching Contributions
Employer matching contributions are contributions that an employer makes to an employee’s 401k plan on the employee’s behalf. These contributions are usually made as a percentage of the employee’s salary, and they are not included in the statutory 401k contribution limit.
For example, if an employee earns $100,000 per year and their employer makes a 5% matching contribution, the employer will contribute $5,000 to the employee’s 401k plan. This $5,000 contribution is not included in the statutory 401k contribution limit, so the employee can still contribute up to $22,500 to their 401k plan for the year.
Table of Contribution Limits
| Plan Type | Employee Contribution Limit | Employer Contribution Limit |
|—|—|—|
| Traditional 401k | $22,500 | 100% of employee salary (up to $66,000 in 2023) |
| Roth 401k | $22,500 | 100% of employee salary (up to $66,000 in 2023) |
401k Plans and Matching Contributions
A 401k is a tax-advanataged account offered by many companies to their employees to encourage them to save for their future.
Employer Matching Contributions
Many companies include plans that offer a form of a 100% match up to a certain amount, which means that he company will provide the same amount of money into the employee’s 401k as the employee contributes. This is called an “employer match.”
| Your annual contribution |
Employer match |
Total annual contribution |
By, taking advantage of the “employer match”, you are, in reality, increasing your return on investment without having to work for it. Besides a 100% match up to a certain amount, here are some of the most common types of matches you may encounter
This is the standard 100% match up to a certain limit with each paycheck. This is where the company may match a set percentage for each paycheck up to a certain amount. This does not start until after the employee has worked for the business for a certain amount of time. This type of match may only apply to funds the company chooses, such as a target-date fund. Understanding 401(k) Contribution LimitsThe 401(k) contribution limit is an annual maximum amount that individuals can contribute to their 401(k) retirement plans. It’s important to understand the difference between employee and employer contributions when considering the contribution limit. Employee Contribution LimitFor 2023, the employee contribution limit is $22,500 (up from $20,500 in 2022). This limit applies to both traditional and Roth 401(k) plans. Employer MatchMany employers offer a matching contribution to their employees’ 401(k) plans. The employer match is a percentage of the employee’s contribution, up to a certain limit. Important: The employer match does not count towards the employee contribution limit. ExampleLet’s say an employee contributes $10,000 to their 401(k) plan. Their employer offers a 50% match, up to a maximum of 6%.
In this example, the employee’s total contribution limit ($22,500) is not affected by the employer match. They can still contribute up to $22,500 of their own funds. Catch-Up Contributions for Employees over 50Individuals age 50 or older are eligible for catch-up contributions. These contributions allow them to save more for retirement in their later years. For 2023, the catch-up contribution limit is $7,500 (up from $6,500 in 2022). This amount is in addition to the regular employee contribution limit. Note: The employer match still does not count towards the catch-up contribution limit. フィギュアは、これまでの 401k の限度額を示していますが、最新の変更を反映しておりません。 401k の限度額については、 IRS のウェブサイト をご確認ください。 |
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