ANNUAL CONTRIBUTION LIMITS
The maximum amount a person can contribute to his or her retirement account is set each year by the IRS after taking inflation into account. For the year 2019, you can contribute up to $19,000 as an elective deferral to your employer’s 401(k) plan. If you are age 50 or older, you can contribute an additional catch-up contribution of $6,000.
The 401(k) limit applies to all 401(k) accounts you might have for the current year. If you work at two or more jobs — or switch jobs in the middle of the year — then you may need to track your contributions yourself to ensure that you don’t contribute beyond the limit.
For people who plan to contribute the maximum allowed, it may be easiest to break the annual limit into equal dollar amounts per pay period. That way, you’ll be saving the same amount each pay period and will be dollar-cost averaging into your retirement investments.
Elective deferrals are treated separately from the employer’s matching contributions. Elective salary deferrals can be placed into a tax-deferred traditional 401(k), a post-tax Roth 401(k) account or a combination of traditional and Roth, as long as the total of all salary deferrals are equal to or less than the annual maximum. Matching contributions from the employer are limited to 25 percent of your salary (or 20 percent of your net self-employment income if you are self-employed). Matching funds are always contributed to the tax-deferred portion of your 401(k) plan. The total of your elective salary deferral, plus employer matching contributions, is limited to $56,000 for the year 2019.
ANNUAL CONTRIBUTION LIMITS
FIDUCIARY RESPONSIBILITY TO MONITOR
|Type of Limitation||2019||2018||2017|
|Elective Deferral Limit (401(k) and 403(b) Plans; Not Including Catch-Up Contributions)||$19,000||$18,500||$18,000|
|Catch-Up Contribution Limit (401(k) and 403(b) Plans)||$6,000||$6,000||$6,000|
|Elective Deferral Limit (SIMPLE Plans)||$13,000||$12,500||$12,500|
|Catch-Up Contribution Limit (SIMPLE Plans)||$3,000||$3,000||$3,000|
|Defined Benefit Plan Limit||$225,000||$220,000||$215,000|
|Defined Contribution Plan Limit||$56,000||$55,000||$54,000|
|Annual Compensation Limit||$280,000||$275,000||$270,000|
|Key Employee Threshold||$180,000||$175,000||$175,000|
|Highly Compensated Employee Threshold||$125,000||$120,000||$120,000|
|Income Subject to Social Security Tax||$132,900||$128,400||$127,200|
While the 2019 annual contribution and benefit limits have not changed significantly from last year here are a few of the highlights:
- The 401(k) & 403(b) maximum annual elective deferral limit increased to $19,000
- The defined benefit annual limit has increase to $225,000
- The annual defined contribution limit has increased to $56,000
- The annual compensation limit increased to $280,000
- The income subject to social security tax increased to $132,900
- Key employee threshold increased to $180,000
- HCE threshold increased to $125,000
- The lifetime cash balance limit is $2,800,000