Retirement Topics - Defined Contribution Plan Limits

The annual limits that apply to your Plan contributions:

Employee Elective Deferral Limit for 401(k), 403(b), 457(b) Plan Types  

The Limit on employee elective deferrals is the lesser of:

The Annual Deferral Limit applies to each Participant within a given Plan, and the Employer is responsible for stopping the Participant's elective deferrals when they reach the Limit. However, it is important to note that the Annual Deferral Limit also applies to the Participant's net deferrals to all Qualified Plan Types, which means a Participant who contributes elective deferrals to more than one employer Plan in a given calendar year is responsible for monitoring and limiting their NET elective deferrals to the Annual Deferral Limit.

The Plan terms may further reduce the Annual Deferral Limit. The Employer may elect (in the Plan Document) to reduce the government-imposed Annual Deferral Limit (402(g) Limit). That Plan-imposed Limit may apply to all Participants or only apply to the Highly Compensated Employees (HCE). Refer to your Summary Plan Description to determine whether your Plan has a Plan imposed reduction to the Annual Deferral Limit.

Catch-Up Limit on Employee Elective Deferral for 401(a), 401(k), and 403(b) Plan Types  

If permitted by your Plan, certain participants may defer an additional elective deferral contribution, referred to as the" Catch-Up" contribution. Refer to your Summary Plan Description to determine if your Plan permits Catch-Up contribution.

*Indexed Limit and subject to change based on cost-of-living adjustments.

The Annual Catch-Up Limit (like the Annual Deferral Limit) applies to each Participant within a given Plan, and the Employer is responsible for stopping the Participant's elective deferrals when they reach the Limit. Again, same as with the Annual Deferral Limit, the Annual Catch-Up Limit applies to the Participant's net deferrals to all Qualified Plan Types, which means a Participant who contributes elective deferrals to more than one employer Plan in a given calendar year is responsible for monitoring and limiting their NET elective deferrals to the Annual Deferral Limit including Catch-Up.

Annual Additions Limit for 401(a), 401(k), and 403(b) Plan Types  

The Annual Additions Limit on Contributions caps the net contribution a Participant can receive in a given Plan Year.

*Indexed Limit and subject to change based on cost-of-living adjustments.

Example 1: Greg, 46, is employed by an employer with a 401(k) plan, and he also works as an independent contractor for an unrelated business. Greg sets up a solo 401(k) plan for his independent contracting business. Greg contributes the maximum amount to his Employer's 401(k) plan for 2024, $23,000. Greg would also like to contribute the maximum amount to his solo 401(k) plan. He cannot make further elective deferrals to his solo 401(k) plan because he has already contributed his personal maximum, $23,000. He has enough earned income from his business to contribute the overall maximum for the year, $69,000 (for 2024). Greg can make a nonelective contribution of $69,000 (for 2024) to his solo 401(k) plan. This Limit is not reduced by the elective deferrals under his Employer's Plan because the Limit on annual additions applies to each Plan separately.

Example 2: In Example 1, if Greg were 52 years old and the Plan permitted catch-up contributions, he could contribute an additional $7,500 in elective deferrals for 2024. His catch-up contribution could be split between the plans in any proportion he chooses. His maximum nonelective contribution to his solo 401K) plan would remain $69,000 for 2024 even if he contributed the full $7,500 catch-up contribution to this Plan.

Annual Additions Limit for SIMPLE 401(k) Plan Types  

The Annual Additions Limit on Contributions caps the net contribution a Participant can receive in a given Plan Year. However, in a SIMPLE 401(k) Plan, the annual additions limit is set by contribution type.

*Indexed Limit and subject to change based on cost-of-living adjustments.

Compensation Limit

Eligible Compensation for Plan purposes are the wages used when determining if a Participant has met or exceeded an Annual Limit. Eligible Compensation (or Plan Compensation) is determined based on two important factors:

  1. The Annual Compensation Limit
    1. $345,000 for 2024 applies to all Defined Contribution Plan Types
  2. The Plan's definition of compensation
    1. The Plan may exclude certain compensation; the excluded compensation might apply to all contribution types or be limited to select contributions. Certain compensation exclusions will require additional nondiscrimination testing. Refer to the Summary Plan Description for your Plan's definition of compensation.

Additional resources:

Page Last Reviewed or Updated: May 2024