RPF M5 U3 Annual Limits

Question 1

How much can a participant contribute to a retirement plan each year?

Answer 1

The amount a participant can contribute is limited by §402(g). For 2023, the limit is $22,500, or 100% of compensation (if compensation is less than $22,500). Participants who are age 50 or older can contribute additional catch-up contributions ($7,500 for 2023).

Question 2

How much can an employer contribute to a plan each year?

Answer 2

The amount the employer can contribute is limited by §404(c). The maximum is 25% of compensation of all eligible participants. The compensation of employees is capped at $330,000 for 2023.

Question 3

What is the annual additions limit, and what contributions are included in it?

Answer 3

The annual additions limit (§415) restricts how much may be allocated to a participant’s account from a variety of sources. They include pre-tax, designated Roth, after-tax contributions, employer contributions, and forfeitures. The limit is $66,000 for 2023.

Question 4

What is the annual deferral limit for a participant under age 50 in 2023?

Answer 4

A participant under age 50 may contribute no more than $22,500 to their 401(k) plan in 2023.

Question 5

What is the total contribution limit for a participant age 50 or over in 2023?

Answer 5

A participant age 50 or over may contribute a total of $30,000, which includes $22,500 in deferrals and an additional $7,500 in catch-up contributions.

Question 6

What is the employer deduction limit?

Answer 6

The employer deduction limit may not exceed 25% of the eligible compensation of all eligible participants.

Question 7

What contributions are included in the annual additions limit?

Answer 7

The annual additions limit includes employer contributions, pre-tax elective deferrals, designated Roth contributions, matching contributions, allocated forfeitures, and after-tax employee contributions.

Question 8

What contributions are not included in the annual additions limit?

Answer 8

Catch-up contributions, rollovers, loan repayments, and investment earnings are not included in the annual additions limit.

Question 9

What happens if contributions exceed the annual additions limit?

Answer 9

If there has been an excess allocation, some of the contributions for the year must either be refunded or forfeited.

Question 10

What is the maximum deductible contribution for an employer?

Answer 10

The maximum deductible contribution for an employer is calculated as 25% of the total eligible compensation of all eligible participants.