Qualified Retirement Plan
Sponsor Questions
Selecting a Plan
Need a Change?
Types of Plans
How much can a participant defer to a 401(k) plan?
Elective deferrals (401k deferrals) are limited to $18,000 for the 2016 calendar years. Note: the plan document might limit elective deferrals to a percent of compensation. Additionally, deferrals are limited to the 100% of compensation annual addition limit, reduced by any employer contribution. Participants age 50 and older can defer an additional 401(k) catch-up contribution of $6,000 during 2016.

What is the maximize contribution amount a participant can receive?
The total amount of contributions from elective deferrals (401k), matching contributions, profit sharing contributions and forfeitures cannot exceed the lesser of 100% of gross compensation per plan year or $53,000 for 2016. This is known as the IRC 415 annual addition limit. The limit for participants age 50 or older is $59,000 if the participant makes a $6,000 401(k) catch-up contribution.

What is the compensation limit for calculating contributions to the plan?:
The maximum compensation limit for calendar year 2016 is limited to $265,000.

How much can the employer deduct as a contribution to a qualified plan?
Generally, the employer can contribute to the plan up to 25% of eligible compensation to a profit sharing plan. Compensation paid to any employee over the compensation limit is disregarded for deduction purposes.

Can a participant borrow from the plan?
If the plan permits loans, generally a participant may borrow up to the lesser of 50% of their vested balance or $50,000, less any outstanding loans. Further, the $50,000 limit is reduced by the highest outstanding loan balance during the last 12 months.

Can a participant receive a distribution before termination of employment?
If the plan permits in-service or hardship distributions, and if a participant qualifies then they may receive a distribution prior to termination of employment. In-service distributions are only allowed from employer accounts and usually require a minimum number of years of employment. Hardships are limited to "immediate and heavy financial need and the withdrawal is necessary to satisfy that need" such as the purchase of a primary residence, payment of college tuition for family, medical expenses for family or to prevent eviction from the primary residence. The withdrawal must not exceed the amount necessary to satisfy the financial need that cannot be satisfied from other sources such as loans and reasonable liquidation of personal assets.

Homepage Cafeteria Plans Target Benefit Pension Plan Money Purchase Plan Age Based Profit Sharing Plans Comparability Profit Sharing Plans Profit Sharing Plan 401(k) Plans