Section 402(g) – Limitation on 401(k) Salary Deferral Contributions
The Code distinguishes 401(k) salary deferral contributions (Pre-tax and Roth deferrals) from other company retirement plan contributions. Deferral contributions are made to the plan at the direction of the employee. The employee could have chosen to receive these amounts in his/her paycheck, but instead elected to have their employer deposit them on a pre-tax or Roth basis to the plan. Section 402(g) of the Code limits these deferrals. The limitation through 2019 will be $19,000 (increased from $18,500 for 2018) and thereafter the limit will be adjusted for inflation. This limit is an individual taxpayer limit. Total deferral contributions allowed for the employee, for all plans across all employers, for the tax year, cannot exceed this 402(g) limitation.
The 402(g) limit does not apply to married couples combined, but individually. One spouse contributing up to the 402(g) limit does not affect the other spouse. Each may contribute to their respective plan independently of the other.
While not part of the 402(g) limit itself, the maximum deferral contribution for highly compensated employees may be further limited by the “Average Deferral Percentage” (ADP) test. See our “401(k) Plan ADP/ACP Testing” section for more information.
Section 414(v) – Catch-Up contribution for individuals age 50 and over
Under a provision added by EGTRRA in 2001, an individual age 50 or over may make additional elective deferrals in excess of the 402(g) dollar limit, which is $19,000 through 2019 (increased from $18,500 for 2018). The contributions are exempt from ADP discrimination testing as well as Section 415 and 404 contribution limits. Catch-Up contributions will be allowed in the amount of $6,000 through 2019. In order to be eligible for a catch-up contribution, the employee must reach a limit as imposed by either the IRS or the plan itself.
Section 415 – Limitation on all Contributions in a 401(k) Plan
For plan years beginning in 2019, this limit is increased to the lesser of $56,000 or 100% of compensation. The limit extends to $62,000 for employees that defer $6,000 (through 2019 limit) in catch-up deferrals.
Section 404 – Limitation of Employer tax deductible contribution
Effective for plan years beginning in 2002, the Code limits the tax deductible contribution for the employer to 25% of total compensation of all eligible plan participants. This amount is exclusive of employee deferral contributions. Prior to 2002 this limit was 15%.