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Understanding the rules and limits for 401(k) contributions is essential for maximizing retirement savings and ensuring compliance with IRS regulations. This article provides an overview of key aspects related to contribution limits, eligibility, and important deadlines.
Annual Contribution Limits
The IRS sets annual contribution limits for 401(k) plans. These limits can change yearly based on inflation adjustments. For 2023, the maximum employee contribution is $22,500. Participants aged 50 and older can make catch-up contributions up to $7,500, totaling $30,000.
Employer Contributions and Total Limits
Employers may also contribute to employee 401(k) accounts through matching or profit-sharing. The combined total of employee and employer contributions cannot exceed the lesser of:
- 150% of the employee’s contribution, or
- $66,000 for 2023, or $73,500 for those aged 50 and above with catch-up contributions.
Contribution Deadlines and Eligibility
Participants must make contributions within the plan’s designated calendar year, typically by December 31. Some plans allow for a deadline extension if contributions are made via payroll deductions. Eligibility requirements vary by employer but generally include age and employment status criteria.